Title 26 — Internal Revenue CodeRelease 119-73
§9704 Liability of Assigned Operators
Title 26 › Subtitle Subtitle J— Coal Industry Health Benefits › Chapter 99— COAL INDUSTRY HEALTH BENEFITS › Subchapter B— Combined Benefit Fund › Part II— FINANCING › § 9704
Summary
Coal companies that have been assigned responsibility for retired miners must pay an annual premium to the Combined Fund, which provides health and death benefits to those retirees. The premium has two main parts today. The health benefit premium is a per-person amount multiplied by the number of retirees assigned to the company. That per-person amount is based on what the 1950 and 1974 UMWA benefit plans spent per person in the plan year that began July 1, 1991, increased to match the rise in medical prices since 1992. The death benefit premium is the company's share of the fund's expected death benefit costs for the year. A third charge, for retirees not assigned to any company, ended for plan years beginning on or after October 1, 2006. Those costs are now covered by money transferred from a federal mining reclamation fund, and companies are billed for them again only if those transfers fall short. Premiums are due in 12 equal monthly installments and are tax deductible. The fund keeps a separate account for each type of premium, and a shortfall or surplus in an account generally raises or lowers each company's premium the next year. A company that was no longer producing coal as of July 1, 2005, and meets certain other conditions, can settle its entire future premium liability with a single lump-sum payment whose amount is certified by an actuary and filed with the Secretary of Labor.
Full Legal Text
Title 26, §9704
Internal Revenue Code — Source: USLM XML via OLRC
(a)Each assigned operator shall pay to the Combined Fund for each plan year beginning on or after February 1, 1993, an annual premium equal to the sum of the following three premiums—
(1)the health benefit premium determined under subsection (b) for such plan year, plus
(2)the death benefit premium determined under subsection (c) for such plan year, plus
(3)the unassigned beneficiaries premium determined under subsection (d) for such plan year.
(b)For purposes of this chapter—
(1)The health benefit premium for any plan year for any assigned operator shall be an amount equal to the product of the per beneficiary premium for the plan year multiplied by the number of eligible beneficiaries assigned to such operator under section 9706.
(2)The Commissioner of Social Security shall calculate a per beneficiary premium for each plan year beginning on or after February 1, 1993, which is equal to the sum of—
(A)the amount determined by dividing—
(i)the aggregate amount of payments from the 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan for health benefits (less reimbursements but including administrative costs) for the plan year beginning July 1, 1991, for all individuals covered under such plans for such plan year, by
(ii)the number of such individuals, plus
(B)the amount determined under subparagraph (A) multiplied by the percentage (if any) by which the medical component of the Consumer Price Index for the calendar year in which the plan year begins exceeds such component for 1992.
(3)If, by reason of a reduction in benefits under title XVIII of the Social Security Act, the level of health benefits under the Combined Fund would be reduced, the trustees of the Combined Fund shall increase the per beneficiary premium for the plan year in which the reduction occurs and each subsequent plan year by the amount necessary to maintain the level of health benefits which would have been provided without such reduction.
(c)The death benefit premium for any plan year for any assigned operator shall be equal to the applicable percentage of the amount, actuarially determined, which the Combined Fund will be required to pay during the plan year for death benefits coverage described in section 9703(c).
(d)(1)For plan years ending on or before September 30, 2006, the unassigned beneficiaries premium for any assigned operator shall be equal to the applicable percentage of the product of the per beneficiary premium for the plan year multiplied by the number of eligible beneficiaries who are not assigned under section 9706 to any person for such plan year.
(2)(A)For plan years beginning on or after October 1, 2006, subject to subparagraph (B), there shall be no unassigned beneficiaries premium, and benefit costs with respect to eligible beneficiaries who are not assigned under section 9706 to any person for any such plan year shall be paid from amounts transferred under section 9705(b).
(B)If, for any plan year beginning on or after October 1, 2006, the amounts transferred under section 9705(b) are less than the amounts required to be transferred to the Combined Fund under subsection (h)(2)(A) or (i) of section 402 of the Surface Mining Control and Reclamation Act of 1977 (30 U.S.C. 1232), then the unassigned beneficiaries premium for any assigned operator shall be equal to the operator’s applicable percentage of the amount required to be so transferred which was not so transferred.
(e)(1)The trustees of the Combined Fund shall establish and maintain 3 separate accounts for each of the premiums described in subsections (b), (c), and (d). Such accounts shall be credited with the premiums received and amounts transferred under section 9705(b) and debited with expenditures allocable to such premiums.
(2)(A)Administrative costs for any plan year shall be allocated to premium accounts under paragraph (1) on the basis of expenditures (other than administrative costs) from such accounts during the preceding plan year.
(B)Interest shall be allocated to the account established for health benefit premiums.
(3)(A)Except as provided in subparagraph (B), if, for any plan year, there is a shortfall or surplus in any premium account, the premium for the following plan year for each assigned operator shall be proportionately reduced or increased, whichever is applicable, by the amount of such shortfall or surplus. Amounts credited to an account from amounts transferred under section 9705(b) shall not be taken into account in determining whether there is a surplus in the account for purposes of this paragraph.
(B)Subparagraph (A) shall not apply to any surplus in the health benefit premium account or the unassigned beneficiaries premium account which is attributable to—
(i)the excess of the premiums credited to such account for a plan year over the benefits (and administrative costs) debited to such account for the plan year, but such excess shall only be available for purposes of the carryover described in section 9703(b)(2)(C)(ii) (relating to carryovers of premiums not used to provide benefits), or
(ii)interest credited under paragraph (2)(B) for the plan year or any preceding plan year.
(C)Nothing in this paragraph shall be construed to allow expenditures for health care benefits for any plan year in excess of the limit under section 9703(b)(2).
(f)For purposes of this section—
(1)The term “applicable percentage” means, with respect to any assigned operator, the percentage determined by dividing the number of eligible beneficiaries assigned under section 9706 to such operator by the total number of eligible beneficiaries assigned under section 9706 to all such operators (determined on the basis of assignments as of October 1, 1993).
(2)In the case of any plan year beginning on or after October 1, 1994, the applicable percentage for any assigned operator shall be redetermined under paragraph (1) by making the following changes to the assignments as of October 1, 1993:
(A)Such assignments shall be modified to reflect any changes during the period beginning October 1, 1993, and ending on the last day of the preceding plan year pursuant to the appeals process under section 9706(f).
(B)The total number of assigned eligible beneficiaries shall be reduced by the eligible beneficiaries of assigned operators which (and all related persons with respect to which) had ceased business (within the meaning of section 9701(c)(6)) during the period described in subparagraph (A).
(C)In the case of plan years beginning on or after October 1, 2007, the total number of assigned eligible beneficiaries shall be reduced by the eligible beneficiaries whose assignments have been revoked under section 9706(h).
(g)(1)The annual premium under subsection (a) for any plan year shall be payable in 12 equal monthly installments, due on the twenty-fifth day of each calendar month in the plan year. In the case of the plan year beginning February 1, 1993, the annual premium under subsection (a) shall be added to such premium for the plan year beginning October 1, 1993.
(2)Any premium required by this section shall be deductible without regard to any limitation on deductibility based on the prefunding of health benefits.
(h)The trustees of the Combined Fund shall, not later than 60 days after the enactment date, furnish to the Commissioner of Social Security information as to the benefits and covered beneficiaries under the fund, and such other information as the Secretary 11 So in original. Probably should be “Commissioner”. may require to compute any premium under this section.
(i)(1)(A)During the plan year of the Combined Fund beginning February 1, 1993, the 1988 agreement operators shall make contributions to the Combined Fund in amounts necessary to pay benefits and administrative costs of the Combined Fund incurred during such year, reduced by the amount transferred to the Combined Fund under section 9705(a) on February 1, 1993.
(B)During the period beginning February 1, 1993, and ending September 30, 1994, the 1988 agreement operators shall make contributions to the Combined Fund as are necessary to pay off the expenses accrued (and remaining unpaid) by the 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan as of February 1, 1993, reduced by the assets of such plans as of such date.
(C)If any 1988 agreement operator fails to meet any obligation under this paragraph, any contributions of such operator to the Combined Fund or any other plan described in section 404(c) shall not be deductible under this title until such time as the failure is corrected.
(D)(i)In the case of a 1988 agreement operator making contributions under subparagraph (A), the premium of such operator under subsection (a) shall be reduced by the amount paid under subparagraph (A) by such operator for the plan year beginning February 1, 1993.
(ii)In the case a 1988 agreement operator making contributions under subparagraph (B), the premium of such operator under subsection (a) shall be reduced by the amounts which are paid to the Combined Fund by reason of claims arising in connection with the 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan as of February 1, 1993, including claims based on the “evergreen clause” found in the language of the 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan, and which are allocated to such operator under subparagraph (E).
(iii)Clause (ii) shall not apply to the extent the amounts paid exceed the contributions.
(iv)Premiums under subsection (a) shall be reduced for the first plan year for which amounts described in clause (i) or (ii) are available and for any succeeding plan year until such amounts are exhausted.
(E)Contributions under subparagraphs (A) and (B), and premium reductions under subparagraph (D)(ii), shall be made ratably on the basis of aggregate contributions made by such operators under the applicable 1988 coal wage agreements as of January 31, 1993.
(2)In the case of the plan year of the Combined Fund beginning February 1, 1993—
(A)the premiums under subsections (a)(1) and (a)(3) shall be 67 percent of such premiums without regard to this paragraph, and
(B)the premiums under subsection (a) shall be paid as provided in subsection (g).
(3)The 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan shall pay the costs of the Combined Fund incurred before February 1, 1993. For purposes of this section, such costs shall be treated as administrative expenses incurred for the plan year beginning February 1, 1993.
(j)(1)If—
(A)a payment meeting the requirements of paragraph (3) is made to the Combined Fund by or on behalf of—
(i)any assigned operator to which this subsection applies, or
(ii)any related person to any assigned operator described in clause (i), and
(B)the common parent of the controlled group of corporations described in paragraph (2)(B) is jointly and severally liable for any premium under this section which (but for this subsection) would be required to be paid by the assigned operator or related person,
(2)(A)This subsection shall apply to any assigned operator if—
(i)the assigned operator (or a related person to the assigned operator)—
(I)made contributions to the 1950 UMWA Benefit Plan and the 1974 UMWA Benefit Plan for employment during the period covered by the 1988 agreement; and
(II)is not a 1988 agreement operator,
(ii)the assigned operator (and all related persons to the assigned operator) are not actively engaged in the production of coal as of July 1, 2005, and
(iii)the assigned operator was, as of July 20, 1992, a member of a controlled group of corporations described in subparagraph (B).
(B)A controlled group of corporations is described in this subparagraph if the common parent of such group is a corporation the shares of which are publicly traded on a United States exchange.
(C)A person shall not fail to be treated as an assigned operator to which this subsection applies solely because the person ceases to be an assigned operator by reason of section 9706(h)(1) if the person otherwise meets the requirements of this subsection and is liable for the payment of premiums under section 9706(h)(3).
(D)For purposes of this subsection, the term “controlled group of corporations” has the meaning given such term by section 52(a).
(3)A payment meets the requirements of this paragraph if—
(A)the amount of the payment is not less than the present value of the total premium liability under this chapter with respect to the Combined Fund of the assigned operators or related persons described in paragraph (1) or their assignees, as determined by the operator’s or related person’s enrolled actuary (as defined in section 7701(a)(35)) using actuarial methods and assumptions each of which is reasonable and which are reasonable in the aggregate, as determined by such enrolled actuary;
(B)such enrolled actuary files with the Secretary of Labor a signed actuarial report containing—
(i)the date of the actuarial valuation applicable to the report; and
(ii)a statement by the enrolled actuary signing the report that, to the best of the actuary’s knowledge, the report is complete and accurate and that in the actuary’s opinion the actuarial assumptions used are in the aggregate reasonably related to the experience of the operator and to reasonable expectations; and
(C)90 calendar days have elapsed after the report required by subparagraph (B) is filed with the Secretary of Labor, and the Secretary of Labor has not notified the assigned operator in writing that the requirements of this paragraph have not been satisfied.
(4)The Combined Fund shall—
(A)establish and maintain an account for each assigned operator or related person by, or on whose behalf, a payment described in paragraph (3) was made,
(B)credit such account with such payment (and any earnings thereon), and
(C)use all amounts in such account exclusively to pay premiums that would (but for this subsection) be required to be paid by the assigned operator.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
References in Text
The Social Security Act, referred to in subsec. (b)(3), is act Aug. 14, 1935, ch. 531, 49 Stat. 620. Title XVIII of the Act is classified generally to subchapter XVIII (§ 1395 et seq.) of chapter 7 of Title 42, The Public Health and Welfare. For complete classification of this Act to the Code, see section 1305 of Title 42 and Tables.
Amendments
2018—Subsec. (d)(2)(B). Pub. L. 115–141 substituted “1232),” for “1232)),”. 2006—Subsec. (d). Pub. L. 109–432, § 212(a)(2)(A), reenacted heading without change and amended text of subsec. (d) generally. Prior to amendment, text read as follows: “The unassigned beneficiaries premium for any plan year for any assigned operator shall be equal to the applicable percentage of the product of the per beneficiary premium for the plan year multiplied by the number of eligible beneficiaries who are not assigned under section 9706 to any person for such plan year.” Subsec. (e)(1). Pub. L. 109–432, § 212(a)(2)(B)(i), inserted “and amounts transferred under section 9705(b)” after “premiums received”. Subsec. (e)(3)(A). Pub. L. 109–432, § 212(a)(2)(B)(ii), inserted at end “Amounts credited to an account from amounts transferred under section 9705(b) shall not be taken into account in determining whether there is a surplus in the account for purposes of this paragraph.” Subsec. (f)(2)(C). Pub. L. 109–432, § 212(a)(2)(C), added subpar. (C). Subsec. (j). Pub. L. 109–432, § 211(a), added subsec. (j). 1994—Subsecs. (b)(2), (h). Pub. L. 103–296 substituted “Commissioner of Social Security” for “Secretary of Health and Human Services”.
Statutory Notes and Related Subsidiaries
Effective Date
of 2006 Amendment Pub. L. 109–432, div. C, title II, § 212(a)(4), Dec. 20, 2006, 120 Stat. 3025, provided that: “The
Amendments
made by this subsection [amending this section and section 9705 and 9706 of this title] shall apply to plan years of the Combined Fund beginning after September 30, 2006.”
Effective Date
of 1994 AmendmentAmendment by Pub. L. 103–296 effective Mar. 31, 1995, see section 110(a) of Pub. L. 103–296, set out as a note under section 401 of Title 42, The Public Health and Welfare.
Reference
Citations & Metadata
Citation
26 U.S.C. § 9704
Title 26 — Internal Revenue Code
Last Updated
Apr 6, 2026
Release point: 119-73