Title 29 — LaborRelease 119-73
§1426 Insolvent plans
Title 29 › Chapter CHAPTER 18— - EMPLOYEE RETIREMENT INCOME SECURITY PROGRAM › Subchapter SUBCHAPTER III— - PLAN TERMINATION INSURANCE › Subtitle Subtitle E— - Special Provisions for Multiemployer Plans › Part part 3— - insolvent plans › § 1426
Summary
If a multiemployer pension plan is insolvent, payments that are not "basic benefits" must be cut back so total monthly payments equal either the plan’s "resource benefit level" or the basic benefit level, whichever is higher. The plan sponsor must write down the resource benefit level for each insolvency year based on a reasonable estimate of what the plan will have and what it must pay. Benefit cuts must be shared in mostly equal percentages among people getting benefits, although the Treasury can allow fair variations for different groups. If the resource benefit level is lower than basic benefits, all non-basic benefits must be stopped. At the end of an insolvency year, if the plan had more money than needed to pay the resource benefit level, the extra must be returned to the people who got payments that year. If some amounts up to the resource benefit level were not paid, those unpaid amounts should be paid out if possible. Except for these two rules, plans do not have to pay back benefits that were suspended. Definitions: "insolvent" means the plan’s resources are not enough to pay benefits when due; "resource benefit level" is the highest monthly benefit the plan can afford from its resources; "available resources" are cash, marketable assets, contributions, withdrawal liability payments, and earnings, minus reasonable admin costs and amounts owed to the corporation; "insolvency year" is a plan year when the plan is insolvent. The sponsor must do a full check at the end of the first critical-status year and at least every 3 plan years after. If assets are not more than 3 times yearly benefits, the sponsor must check whether the plan could be insolvent in the next 5 plan years and, if so, check yearly until it is not expected to be insolvent. The sponsor must tell the Treasury and other required parties if insolvency is possible, must notify them of the resource benefit level at least 2 months before an insolvency year, and must make the written resource and basic-benefit levels available at least 3 months before the insolvency year. If basic benefits cannot be paid, the sponsor may or must apply for financial help under section 1431 depending on the calculated resource level. Sections (a) and (c) do not apply to plans covered by the special rule in section 1085(e)(9).
Full Legal Text
Title 29, §1426
Labor — Source: USLM XML via OLRC
(a)Notwithstanding section 1053 and 1054 of this title, in any case in which benefit payments under an insolvent multiemployer plan exceed the resource benefit level, any such payments of benefits which are not basic benefits shall be suspended, in accordance with this section, to the extent necessary to reduce the sum of such payments and the payments of such basic benefits to the greater of the resource benefit level or the level of basic benefits, unless an alternative procedure is prescribed by the corporation under section 1322a(g)(5) of this title.
(b)For purposes of this section, for a plan year—
(1)a multiemployer plan is insolvent if the plan’s available resources are not sufficient to pay benefits under the plan when due for the plan year, or if the plan is determined to be insolvent under subsection (d);
(2)“resource benefit level” means the level of monthly benefits determined under subsections (c)(1) and (3) and (d)(3) to be the highest level which can be paid out of the plan’s available resources;
(3)“available resources” means the plan’s cash, marketable assets, contributions, withdrawal liability payments, and earnings, less reasonable administrative expenses and amounts owed for such plan year to the corporation under section 1431(b)(2) of this title; and
(4)“insolvency year” means a plan year in which a plan is insolvent.
(c)(1)The plan sponsor of a plan in critical status, as described in subsection 11 So in original. Probably should be “section”. 1085(b)(2) of this title, shall determine in writing the plan’s resource benefit level for each insolvency year, based on the plan sponsor’s reasonable projection of the plan’s available resources and the benefits payable under the plan.
(2)(A)The suspension of benefit payments under this section shall, in accordance with regulations prescribed by the Secretary of the Treasury, apply in substantially uniform proportions to the benefits of all persons in pay status under the plan, except that the Secretary of the Treasury may prescribe rules under which benefit suspensions for different participant groups may be varied equitably to reflect variations in contribution rates and other relevant factors including differences in negotiated levels of financial support for plan benefit obligations.
(B)For purposes of this paragraph—
(i)the term “person in pay status” means—
(I)a participant or beneficiary on the last day of the base plan year who, at any time during such year, was paid an early, late, normal, or disability retirement benefit (or a death benefit related to a retirement benefit), and
(II)to the extent provided in regulations prescribed by the Secretary of the Treasury, any other person who is entitled to such a benefit under the plan.
(ii)the base plan year for any plan year is—
(I)if there is a relevant collective bargaining agreement, the last plan year ending at least 6 months before the relevant effective date, or
(II)if there is no relevant collective bargaining agreement, the last plan year ending at least 12 months before the beginning of the plan year.
(iii)a relevant collective bargaining agreement is a collective bargaining agreement—
(I)which is in effect for at least 6 months during the plan year, and
(II)which has not been in effect for more than 36 months as of the end of the plan year.
(iv)the relevant effective date is the earliest of the effective dates for the relevant collective bargaining agreements.
(3)Notwithstanding paragraph (2), if a plan sponsor determines in writing a resource benefit level for a plan year which is below the level of basic benefits, the payment of all benefits other than basic benefits must be suspended for that plan year.
(4)(A)If, by the end of an insolvency year, the plan sponsor determines in writing that the plan’s available resources in that insolvency year could have supported benefit payments above the resource benefit level for that insolvency year, the plan sponsor shall distribute the excess resources to the participants and beneficiaries who received benefit payments from the plan in that insolvency year, in accordance with regulations prescribed by the Secretary of the Treasury.
(B)For purposes of this paragraph, the term “excess resources” means available resources above the amount necessary to support the resource benefit level, but no greater than the amount necessary to pay benefits for the plan year at the benefit levels under the plan.
(5)If, by the end of an insolvency year, any benefit has not been paid at the resource benefit level, amounts up to the resource benefit level which were unpaid shall be distributed to the participants and beneficiaries, in accordance with regulations prescribed by the Secretary of the Treasury, to the extent possible taking into account the plan’s total available resources in that insolvency year.
(6)Except as provided in paragraph (4) or (5), a plan is not required to make retroactive benefit payments with respect to that portion of a benefit which was suspended under this section.
(d)(1)As of the end of the first plan year in which a plan is in critical status, as described in subsection 1 1085(b)(2) of this title,,22 So in original. and at least every 3 plan years thereafter (unless the plan is no longer in critical status, as described in subsection 1 1085(b)(2) of this title,),2 the plan sponsor shall compare the value of plan assets for that plan year with the total amount of benefit payments made under the plan for that plan year. Unless the plan sponsor determines that the value of plan assets exceeds 3 times the total amount of benefit payments, the plan sponsor shall determine whether the plan will be insolvent in any of the next 5 plan years. If the plan sponsor makes such a determination that the plan will be insolvent in any of the next 5 plan years, the plan sponsor shall make the comparison under this paragraph at least annually until the plan sponsor makes a determination that the plan will not be insolvent in any of the next 5 plan years.
(2)If, at any time, the plan sponsor of a plan in critical status, as described in subsection 1 1085(b)(2) of this title, reasonably determines, taking into account the plan’s recent and anticipated financial experience, that the plan’s available resources are not sufficient to pay benefits under the plan when due for the next plan year, the plan sponsor shall make such determination available to interested parties.
(3)The plan sponsor of a plan in critical status, as described in subsection 1 1085(b)(2) of this title, shall determine in writing for each insolvency year the resource benefit level and the level of basic benefits no later than 3 months before the insolvency year.
(4)For purposes of this subsection, the value of plan assets shall be the value of the available plan assets determined under regulations prescribed by the Secretary of the Treasury.
(e)(1)If the plan sponsor of a plan in critical status, as described in subsection 1 1085(b)(2) of this title, determines under subsection (d)(1) or (2) that the plan may become insolvent (within the meaning of subsection (b)(1)), the plan sponsor shall—
(A)notify the Secretary of the Treasury,33 So in original. The comma probably should be “and”. the parties described in section 1021(f)(1) of this title of that determination, and
(B)inform the parties described in section 1021(f)(1) of this title that if insolvency occurs certain benefit payments will be suspended, but that basic benefits will continue to be paid.
(2)No later than 2 months before the first day of each insolvency year, the plan sponsor of a plan in critical status, as described in subsection 1 1085(b)(2) of this title, shall notify the Secretary of the Treasury, the corporation, and the parties described in paragraph (1)(B) of the resource benefit level determined in writing for that insolvency year.
(3)In any case in which the plan sponsor anticipates that the resource benefit level for an insolvency year may not exceed the level of basic benefits, the plan sponsor shall notify the corporation.
(4)Notice required by this subsection shall be given in accordance with regulations prescribed by the corporation, except that notice to the Secretary of the Treasury shall be given in accordance with regulations prescribed by the Secretary of the Treasury.
(5)The corporation may prescribe a time other than the time prescribed by this section for the making of a determination or the filing of a notice under this section.
(f)(1)If the plan sponsor of an insolvent plan, for which the resource benefit level is above the level of basic benefits, anticipates that, for any month in an insolvency year, the plan will not have funds sufficient to pay basic benefits, the plan sponsor may apply for financial assistance from the corporation under section 1431 of this title.
(2)A plan sponsor who has determined a resource benefit level for an insolvency year which is below the level of basic benefits shall apply for financial assistance from the corporation under section 1431 of this title.
(g)Subsections (a) and (c) shall not apply to a plan that, for the plan year, is operating under section 1085(e)(9) of this title, regarding benefit suspensions by certain multiemployer plans in critical and declining status.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Amendments
2014—Subsec. (c)(1). Pub. L. 113–235, § 108(a)(2)(A), substituted “critical status, as described in subsection 1085(b)(2) of this title,” for “reorganization”. Subsec. (c)(2). Pub. L. 113–235, § 108(a)(2)(B), designated existing provisions as subpar. (A), struck out “(within the meaning of section 1421(b)(6) of this title)” after “pay status”, and added subpar. (B). Subsec. (d). Pub. L. 113–235, § 108(a)(2)(A), substituted “critical status, as described in subsection 1085(b)(2) of this title,” for “reorganization” wherever appearing. Subsec. (d)(1). Pub. L. 113–235, § 108(a)(2)(C)(i), struck out “(determined in accordance with section 1423(b)(3)(B)(ii) of this title)” after “compare the value of plan assets”. Subsec. (d)(4). Pub. L. 113–235, § 108(a)(2)(C)(ii), added par. (4). Subsec. (e). Pub. L. 113–235, § 108(a)(2)(A), substituted “critical status, as described in subsection 1085(b)(2) of this title,” for “reorganization” in pars. (1) and (2). Subsec. (e)(1)(A). Pub. L. 113–235, § 108(a)(2)(D)(i), substituted “the parties described in section 1021(f)(1) of this title” for “the corporation, the parties described in section 1422(a)(2) of this title, and the plan participants and beneficiaries”. Subsec. (e)(1)(B). Pub. L. 113–235, § 108(a)(2)(D)(ii), substituted “section 1021(f)(1) of this title” for “section 1422(a)(2) of this title and the plan participants and beneficiaries”. Subsec. (g). Pub. L. 113–235, § 108(a)(2)(E), added subsec. (g). 2006—Subsec. (d)(1). Pub. L. 109–280 substituted “5 plan years” for “3 plan years” the second place it appeared and inserted at end “If the plan sponsor makes such a determination that the plan will be insolvent in any of the next 5 plan years, the plan sponsor shall make the comparison under this paragraph at least annually until the plan sponsor makes a determination that the plan will not be insolvent in any of the next 5 plan years.”
Statutory Notes and Related Subsidiaries
Effective Date
of 2014 AmendmentAmendment by Pub. L. 113–235 applicable with respect to plan years beginning after Dec. 31, 2014, see section 108(c) of div. O of Pub. L. 113–235, set out as an
Effective Date
of Repeal note under section 418 of Title 26, Internal Revenue Code.
Effective Date
of 2006 Amendment Pub. L. 109–280, title II, § 203(b), Aug. 17, 2006, 120 Stat. 886, provided that: “The
Amendments
made by this section [amending this section] shall apply with respect to determinations made in plan years beginning after 2007.” Withdrawal Liability of Employer From Plan Terminating While Plan Insolvent Within This Section: Determinations, Factors, Etc.Pub. L. 96–364, title I, § 108(c)(3), Sept. 26, 1980, 94 Stat. 1268, provided that: “(A) For the purpose of determining the withdrawal liability of an employer under title IV of the Employee Retirement Income Security Act of 1974 [this subchapter] from a plan that terminates while the plan is insolvent (within the meaning of section 4245 of such Act [this section]), the plan’s unfunded vested benefits shall be reduced by an amount equal to the sum of all overburden credits that were applied in determining the plan’s accumulated funding deficiency for all plan years preceding the first plan year in which the plan is insolvent, plus interest thereon. “(B) The provisions of subparagraph (A) apply only if—“(i) the plan would have been eligible for the overburden credit in the last plan year beginning before the date of the enactment of this Act [Sept. 26, 1980], if section 4243 of the Employee Retirement Income Security Act of 1974 [former section 1423 of this title] had been in effect for that plan year, and “(ii) the Pension Benefit Guaranty Corporation determines that the reduction of unfunded vested benefits under subparagraph (A) would not significantly increase the risk of loss to the corporation.”
Reference
Citations & Metadata
Citation
29 U.S.C. § 1426
Title 29 — Labor
Last Updated
Apr 6, 2026
Release point: 119-73