PRIA, Government Policy, Made Personal

Summary

Plan sponsors may set up or join a withdrawal liability payment fund. A “withdrawal liability payment fund” is a trust under 26 U.S.C. 501(c)(22) that: covers a large share of participants in eligible multiemployer plans, is paid into by those plans, and is run by a Board of Trustees with equal employer and employee representation. If an employer leaves a participating plan, the fund must pay the plan the employer’s unattributable liability, any withdrawal payments that would have been due but for sections 1388, 1389, 1399, or 1405, and withdrawal payments that the plan cannot collect. The fund can also pay the employer’s attributable liability if it pays both types together and then has the plan’s right to collect from the employer. The trust money can only be used for those payments and for reasonable administrative costs. Payments from plans to the fund count as plan administration expenses under sections 1103(c)(1) and 1104(a)(1)(A)(ii), and payments from the fund to a plan count as necessary plan services under section 1108(b)(2) or 26 U.S.C. 4975(d)(2). The fund takes over the plan’s collection rights for amounts it pays. Fund fiduciaries must follow the fiduciary rules in this chapter, which override state law where inconsistent. No fund payments are allowed if the withdrawn employer’s employees continue to be represented by the same labor organization under section 159. Employers may still buy insurance. The corporation may issue rules consistent with this section to carry out its purposes.

Title 29, §1403

Labor, Source: USLM XML via OLRC

(a)Establishment of or participation in fund by plan sponsors

The plan sponsors of multiemployer plans may establish or participate in a withdrawal liability payment fund.

(b)Definitions

For purposes of this section, the term “withdrawal liability payment fund”, and the term “fund”, mean a trust which—

(1)is established and maintained under section 501(c)(22) of title 26,

(2)maintains agreements which cover a substantial portion of the participants who are in multiemployer plans which (under the rules of the trust instrument) are eligible to participate in the fund,

(3)is funded by amounts paid by the plans which participate in the fund, and

(4)is administered by a Board of Trustees, and in the administration of the fund there is equal representation of—

(A)trustees representing employers who are obligated to contribute to the plans participating in the fund, and

(B)trustees representing employees who are participants in plans which participate in the fund.

(c)Payments to plan; amount, criteria, etc.

(1)If an employer withdraws from a plan which participates in a withdrawal liability payment fund, then, to the extent provided in the trust, the fund shall pay to that plan—

(A)the employer’s unattributable liability,

(B)the employer’s withdrawal liability payments which would have been due but for section 1388, 1389, 1399, or 1405 of this title,

(C)the employer’s withdrawal liability payments to the extent they are uncollectible.

(2)The fund may provide for the payment of the employer’s attributable liability if the fund—

(A)provides for the payment of both the attributable and the unattributable liability of the employer in a single payment, and

(B)is subrogated to all rights of the plan against the employer.

(3)For purposes of this section, the term—

(A)“attributable liability” means the excess, if any, determined under the provisions of a plan not inconsistent with regulations of the corporation, of—

(i)the value of vested benefits accrued as a result of service with the employer, over

(ii)the value of plan assets attributed to the employer, and

(B)“unattributable liability” means the excess of withdrawal liability over attributable liability.

Such terms may be further defined, and the manner in which they shall be applied may be prescribed, by the corporation by regulation.

(4)(A)The trust of a fund shall be maintained for the exclusive purpose of paying—

(i)any amount described in paragraph (1) and paragraph (2), and

(ii)reasonable and necessary administrative expenses in connection with the establishment and operation of the trust and the processing of claims against the fund.

(B)The amounts paid by a plan to a fund shall be deemed a reasonable expense of administering the plan under section 1103(c)(1) and 1104(a)(1)(A)(ii) of this title, and the payments made by a fund to a participating plan shall be deemed services necessary for the operation of the plan within the meaning of section 1108(b)(2) of this title or within the meaning of section 4975(d)(2) of title 26.

(d)Application of payments by plan

(1)For purposes of this part—

(A)only amounts paid by the fund to a plan under subsection (c)(1)(A) shall be credited to withdrawal liability otherwise payable by the employer, unless the plan otherwise provides, and

(B)any amounts paid by the fund under subsection (c) to a plan shall be treated by the plan as a payment of withdrawal liability to such plan.

(2)For purposes of applying provisions relating to the funding standard accounts (and minimum contribution requirements), amounts paid from the plan to the fund shall be applied to reduce the amount treated as contributed to the plan.

(e)Subrogation of fund to rights of plan

The fund shall be subrogated to the rights of the plan against the employer that has withdrawn from the plan for amounts paid by a fund to a plan under—

(1)subsection (c)(1)(A), to the extent not credited under subsection (d)(1)(A), and

(2)subsection (c)(1)(C).

(f)Discharge of rights of fiduciary of fund; standards applicable, etc.

Notwithstanding any other provision of this chapter, a fiduciary of the fund shall discharge the fiduciary’s duties with respect to the fund in accordance with the standards for fiduciaries prescribed by this chapter (to the extent not inconsistent with the purposes of this section), and in accordance with the documents and instruments governing the fund insofar as such documents and instruments are consistent with the provisions of this chapter (to the extent not inconsistent with the purposes of this section). The provisions of the preceding sentence shall supersede any and all State laws relating to fiduciaries insofar as they may now or hereafter relate to a fund to which this section applies.

(g)Prohibition on payments from fund to plan where certain labor negotiations involve employer withdrawn or partially withdrawn from plan and continuity of labor organization representing employees continues

No payments shall be made from a fund to a plan on the occasion of a withdrawal or partial withdrawal of an employer from such plan if the employees representing the withdrawn contribution base units continue, after such withdrawal, to be represented under section 159 of this title (or other applicable labor laws) in negotiations with such employer by the labor organization which represented such employees immediately preceding such withdrawal.

(h)Purchase of insurance by employer

Nothing in this section shall be construed to prohibit the purchase of insurance by an employer from any other person, to limit the circumstances under which such insurance would be payable, or to limit in any way the terms and conditions of such insurance.

(i)Promulgation of regulations for establishment and maintenance of fund

The corporation may provide by regulation rules not inconsistent with this section governing the establishment and maintenance of funds, but only to the extent necessary to carry out the purposes of this part (other than section 1402 of this title).

Notes & Related Subsidiaries

Editorial Notes

References in Text

This chapter, referred to in subsec. (f), was in the original “this Act”, meaning Pub. L. 93–406, known as the Employee Retirement Income Security Act of 1974. Titles I, III, and IV of such Act are classified principally to this chapter. For complete classification of this Act to the Code, see

Short Title

note set out under section 1001 of this title and Tables.

Amendments

1989—Subsecs. (b)(1), (c)(4)(B). Pub. L. 101–239 substituted “Internal Revenue Code of 1986” for “Internal Revenue Code of 1954”, which for purposes of codification was translated as “title 26” thus requiring no change in text.

Statutory Notes and Related Subsidiaries

Effective Date

of 1989 AmendmentAmendment by Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 7891(f) of Pub. L. 101–239, set out as a note under section 1002 of this title.

§1403 Withdrawal Liability Payment Fund