PRIA, Government Policy, Made Personal

Summary

Tells how much an employer must pay when it stops contributing to certain pension plans that mostly cover people retired before January 1, 1976. If the employer withdraws before the plan is officially ended under the law, each year it must pay whichever is larger: the amount set by section 1399(c)(1)(C)(i), or the number of contribution base units it would have owed for the prior year times the contribution rate needed to meet the amortization schedule in section 1423(d)(3)(B)(ii) (ignoring any legal caps on that rate). An employer can’t be charged more than the total withdrawal liability calculated with interest. If an employer withdraws after December 31, 1983 and the union agrees to the plan’s ending, subsection (c) applies only if three conditions are met about past declines in contribution units, at least 50 percent of certain past liability being judged uncollectible, and contribution rates meeting the schedule after September 26, 1980. Applies to plans covered by section 404(c) of the tax code or their continuations, where most participants retired before January 1, 1976. Under subsection (c), the employer’s bill is its normal withdrawal amount multiplied by the larger of 90 percent or a fraction: the part of unfunded vested benefits from participants with 10 or more years of signatory service divided by total unfunded vested benefits. A "year of signatory service" is any year when the participant worked for an employer who was required (then or later) to make contributions.

Title 29, §1396

Labor, Source: USLM XML via OLRC

(a)Amount of withdrawal liability; determinative factors

In the case of a plan described in subsection (b)—

(1)if an employer withdraws prior to a termination described in section 1341a(a)(2) of this title, the amount of withdrawal liability to be paid in any year by such employer shall be an amount equal to the greater of—

(A)the amount determined under section 1399(c)(1)(C)(i) of this title, or

(B)the product of—

(i)the number of contribution base units for which the employer would have been required to make contributions for the prior plan year if the employer had not withdrawn, multiplied by

(ii)the contribution rate for the plan year which would be required to meet the amortization schedules contained in section 1423(d)(3)(B)(ii) of this title (determined without regard to any limitation on such rate otherwise provided by this subchapter)

except that an employer shall not be required to pay an amount in excess of the withdrawal liability computed with interest; and

(2)the withdrawal liability of an employer who withdraws after December 31, 1983, as a result of a termination described in section 1341a(a)(2) of this title which is agreed to by the labor organization that appoints the employee representative on the joint board of trustees which sponsors the plan, shall be determined under subsection (c) if—

(A)as a result of prior employer withdrawals in any plan year commencing after January 1, 1980, the number of contribution base units is reduced to less than 67 percent of the average number of such units for the calendar years 1974 through 1979; and

(B)at least 50 percent of the withdrawal liability attributable to the first 33 percent decline described in subparagraph (A) has been determined by the plan sponsor to be uncollectible within the meaning of regulations of the corporation of general applicability; and

(C)the rate of employer contributions under the plan for each plan year following the first plan year beginning after September 26, 1980 and preceding the termination date equals or exceeds the rate described in section 1423(d)(3) 1 of this title.

(b)Covered plans

A plan is described in this subsection if—

(1)it is a plan described in section 404(c) of title 26 or a continuation thereof; and

(2)participation in the plan is substantially limited to individuals who retired prior to January 1, 1976.

(c)Amount of liability of employer; “a year of signatory service” defined

(1)The amount of an employer’s liability under this paragraph is the product of—

(A)the amount of the employer’s withdrawal liability determined without regard to this section, and

(B)the greater of 90 percent, or a fraction—

(i)the numerator of which is an amount equal to the portion of the plan’s unfunded vested benefits that is attributable to plan participants who have a total of 10 or more years of signatory service, and

(ii)the denominator of which is an amount equal to the total unfunded vested benefits of the plan.

(2)For purposes of paragraph (1), the term “a year of signatory service” means a year during any portion of which a participant was employed for an employer who was obligated to contribute in that year, or who was subsequently obligated to contribute.

Editorial Notes

References in Text

section 1423 of this title, referred to in subsec. (a)(1)(B)(ii), (2)(C), was repealed by Pub. L. 113–235, div. O, title I, § 108(a)(1), Dec. 16, 2014, 128 Stat. 2786.

§1396 Special Rules for Plans Under Section 404(c) of Title 26

Summary

Title 29, §1396

Notes & Related Subsidiaries

Editorial Notes

References in Text

Citations & Metadata