§1405 — Title 29 Labor | U.S. Code

Summary

Limits how much a company must pay to a multiemployer pension plan after it sells nearly all its assets to an unrelated buyer or when it is being liquidated. If the sale is a real, arm’s‑length deal, the amount the employer can be charged for unpaid promised benefits (unfunded vested benefits) can’t be more than the larger of two things: a portion of the employer’s liquidation value after the sale (set by the table below), or, if the plan uses the “attributable” method, the unpaid benefits tied to that employer’s employees. The portion is set by a sliding scale: up to $5,000,000 = 30% of the amount; $5,000,001–$10,000,000 = $1,500,000 + 35% of excess over $5,000,000; $10,000,001–$15,000,000 = $3,250,000 + 40% of excess over $10,000,000; $15,000,001–$17,500,000 = $5,250,000 + 45% of excess over $15,000,000; $17,500,001–$20,000,000 = $6,375,000 + 50% of excess over $17,500,000; $20,000,001–$22,500,000 = $7,625,000 + 60% of excess over $20,000,000; $22,500,001–$25,000,000 = $9,125,000 + 70% of excess over $22,500,000; over $25,000,000 = $10,875,000 + 80% of excess over $25,000,000. If the employer is insolvent and being liquidated, the charge for unpaid benefits is limited. First the plan may claim 50% of the usual amount. Then it may get more, but only up to whatever part of the remaining 50% fits within the employer’s liquidation value as of the start of liquidation after subtracting that first 50%. Personal property that is exempt in bankruptcy under 11 U.S.C. 522 (or similar laws) cannot be taken to enforce an individual’s withdrawal debt. Definitions: "insolvent" = liabilities (including withdrawal liability as normally computed) are more than assets at the start of liquidation; "liquidation or dissolution value" = the employer’s value measured without counting withdrawal liability. If multiple withdrawals come from the same sale or liquidation, they count as one event, and the allowed total is split among plans in the same proportions the plans’ original liabilities bore to the total.

Title 29, §1405

Labor — Source: USLM XML via OLRC

(a)(1)In the case of bona fide sale of all or substantially all of the employer’s assets in an arm’s-length transaction to an unrelated party (within the meaning of section 1384(d) of this title), the unfunded vested benefits allocable to an employer (after the application of all sections of this part having a lower number designation than this section), other than an employer undergoing reorganization under title 11 or similar provisions of State law, shall not exceed the greater of—

(A)a portion (determined under paragraph (2)) of the liquidation or dissolution value of the employer (determined after the sale or exchange of such assets), or

(B)in the case of a plan using the attributable method of allocating withdrawal liability, the unfunded vested benefits attributable to employees of the employer.

(2)For purposes of paragraph (1), the portion shall be determined in accordance with the following table: If the liquidation or distribution value of the employer after the sale or exchange is—The portion is— Not more than $5,000,00030 percent of the amount. More than $5,000,000, but not more than $10,000,000$1,500,000, plus 35 percent of the amount in excess of $5,000,000. More than $10,000,000, but not more than $15,000,000$3,250,000, plus 40 percent of the amount in excess of $10,000,000. More than $15,000,000, but not more than $17,500,000$5,250,000, plus 45 percent of the amount in excess of $15,000,000. More than $17,500,000, but not more than $20,000,000$6,375,000, plus 50 percent of the amount in excess of $17,500,000. More than $20,000,000, but not more than $22,500,000$7,625,000, plus 60 percent of the amount in excess of $20,000,000. More than $22,500,000, but not more than $25,000,000$9,125,000, plus 70 percent of the amount in excess of $22,500,000. More than $25,000,000$10,875,000, plus 80 percent of the amount in excess of $25,000,000.

(b)In the case of an insolvent employer undergoing liquidation or dissolution, the unfunded vested benefits allocable to that employer shall not exceed an amount equal to the sum of—

(1)50 percent of the unfunded vested benefits allocable to the employer (determined without regard to this section), and

(2)that portion of 50 percent of the unfunded vested benefits allocable to the employer (as determined under paragraph (1)) which does not exceed the liquidation or dissolution value of the employer determined—

(A)as of the commencement of liquidation or dissolution, and

(B)after reducing the liquidation or dissolution value of the employer by the amount determined under paragraph (1).

(c)To the extent that the withdrawal liability of an employer is attributable to his obligation to contribute to or under a plan as an individual (whether as a sole proprietor or as a member of a partnership), property which may be exempt from the estate under section 522 of title 11 or under similar provisions of law, shall not be subject to enforcement of such liability.

(d)For purposes of this section—

(1)an employer is insolvent if the liabilities of the employer, including withdrawal liability under the plan (determined without regard to subsection (b)), exceed the assets of the employer (determined as of the commencement of the liquidation or dissolution), and

(2)the liquidation or dissolution value of the employer shall be determined without regard to such withdrawal liability.

(e)In the case of one or more withdrawals of an employer attributable to the same sale, liquidation, or dissolution, under regulations prescribed by the corporation—

(1)all such withdrawals shall be treated as a single withdrawal for the purpose of applying this section, and

(2)the withdrawal liability of the employer to each plan shall be an amount which bears the same ratio to the present value of the withdrawal liability payments to all plans (after the application of the preceding provisions of this section) as the withdrawal liability of the employer to such plan (determined without regard to this section) bears to the withdrawal liability of the employer to all such plans (determined without regard to this section).

Notes & Related Subsidiaries

Editorial Notes

Amendments

2006—Subsec. (a)(1)(B). Pub. L. 109–280, § 204(a)(2), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “the unfunded vested benefits attributable to employees of the employer.” Subsec. (a)(2). Pub. L. 109–280, § 204(a)(1), added table and struck out former table which provided for a portion of: 30 percent of the amount if the liquidation or dissolution value of the employer after the sale or exchange is not more than $2,000,000; $600,000, plus 35 percent of the amount in excess of $2,000,000, if the employer’s liquidation or dissolution value is more than $2,000,000, but not more than $4,000,000; $1,300,000, plus 40 percent of the amount in excess of $4,000,000, if the employer’s liquidation or dissolution value is more than $4,000,000, but not more than $6,000,000; $2,100,000, plus 45 percent of the amount in excess of $6,000,000, if the employer’s liquidation or dissolution value is more than $6,000,000, but not more than $7,000,000; $2,550,000, plus 50 percent of the amount in excess of $7,000,000, if the employer’s liquidation or dissolution value is more than $7,000,000, but not more than $8,000,000; $3,050,000, plus 60 percent of the amount in excess of $8,000,000, if the employer’s liquidation or dissolution value is more than $8,000,000, but not more than $9,000,000; $3,650,000, plus 70 percent of the amount in excess of $9,000,000, if the employer’s liquidation or dissolution value is more than $9,000,000, but not more than $10,000,000; and $4,350,000, plus 80 percent of the amount in excess of $10,000,000, if the employer’s liquidation or dissolution value is more than $10,000,000.

Statutory Notes and Related Subsidiaries

Effective Date

of 2006 Amendment Pub. L. 109–280, title II, § 204(a)(3), Aug. 17, 2006, 120 Stat. 887, provided that: “The

Amendments

made by this subsection [amending this section] shall apply to sales occurring on or after January 1, 2007.”

§1405 Limitation on Withdrawal Liability

Summary

Title 29, §1405

Notes & Related Subsidiaries

Editorial Notes

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Amendments

Citations & Metadata