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

Summary

Pension plans that match the kind described in tax law 404(c) and mostly cover people who retired before Jan 1, 1976 use special rules when an employer stops contributing. If an employer leaves before a termination under section 1341a(a)(2), the yearly withdrawal bill is the larger of two amounts: the amount set in section 1399(c)(1)(C)(i), or the number of contribution base units the employer would have had for the prior plan year multiplied by the contribution rate needed to meet the schedules in section 1423(d)(3)(B)(ii) (calculated without any limit on that rate). If an employer leaves after Dec 31, 1983 and the union that names the employee trustee agrees to the termination, subsection (c) applies only if three things happen: contribution base units fall below 67% of the 1974–1979 average because of withdrawals after Jan 1, 1980; at least 50% of the withdrawal liability tied to the first 33% drop is judged uncollectible by the plan sponsor under the corporation’s rules; and the plan’s contribution rate for each plan year after the first plan year starting after Sep 26, 1980 and before termination meets or exceeds the rate in section 1423(d)(3). Under subsection (c), an employer’s charge equals the usual withdrawal liability multiplied by the greater of 90% or a fraction: numerator = the plan’s unfunded vested benefits that come from participants with 10 or more years of signatory service; denominator = the plan’s total unfunded vested benefits. A “year of signatory service” is any year a participant worked for an employer who was required to contribute that year or was later required to contribute.