§1386 Adjustment for Partial Withdrawal; Determination of Amount; Reduction for Partial Withdrawal Liability; Procedures Applicable

Summary

When an employer partially leaves a pension plan, the bill they owe is set by two steps. First, find the amount the employer would owe if they had fully left on the date of the partial withdrawal (or, for a 70% drop in contributions, on the last day of the first plan year of the 3-year test). Second, multiply that amount by 1 minus a fraction. The fraction is the employer’s contribution base units for the plan year after the partial withdrawal divided by the average of their contribution base units for the five plan years before the withdrawal (or before the 3-year test for a 70% drop). Contribution base units are a measure of the employer’s work or contributions to the plan. If the employer later has more withdrawal liability, the new amount is reduced by the prior partial-withdrawal charge (after any reductions or abatements). The corporation must make rules to adjust those reductions for changes in unfunded vested benefits, changes in contribution base units, and any other factors it thinks are appropriate.