26 U.S.C. § 412: Minimum funding standards

A plan to which this section applies shall satisfy the minimum funding standard applicable to the plan for any plan year. in the case of a defined benefit plan which is not a multiemployer plan or a CSEC plan, the employer makes contributions to or under the plan for the plan year which, in the aggregate, are not less than the minimum required contribution determined under section 430 for the plan for the plan year, in the case of a money purchase plan which is not a multiemployer plan, the employer makes contributions to or under the plan for the plan year which are required under the terms of the plan, in the case of a multiemployer plan, the employers make contributions to or under the plan for any plan year which, in the aggregate, are sufficient to ensure that the plan does not have an accumulated funding deficiency under section 431 as of the end of the plan year, and in the case of a CSEC plan, the employers make contributions to or under the plan for any plan year which, in the aggregate, are sufficient to ensure that the plan does not have an accumulated funding deficiency under section 433 as of the end of the plan year. Except as provided in paragraph (2), the amount of any contribution required by this section (including any required installments under paragraphs (3) and (4) of section 430(j) or under section 433(f)) shall be paid by the employer responsible for making contributions to or under the plan. If the employer referred to in paragraph (1) is a member of a controlled group, each member of such group shall be jointly and severally liable for payment of such contributions. Paragraph (1) shall not apply in the case of a multiemployer plan for any plan year in which the plan is in critical status pursuant to section 432. This paragraph shall only apply if the plan sponsor adopts a rehabilitation plan in accordance with section 432(e) and complies with such rehabilitation plan (and any modifications of the plan). an employer is (or in the case of a multiemployer plan or a CSEC plan, 10 percent or more of the number of employers contributing to or under the plan are) unable to satisfy the minimum funding standard for a plan year without temporary substantial business hardship (substantial business hardship in the case of a multiemployer plan), and application of the standard would be adverse to the interests of plan participants in the aggregate, in the case of a defined benefit plan which is not a multiemployer plan or a CSEC plan, the minimum required contribution under section 430 for the plan year shall be reduced by the amount of the waived funding deficiency and such amount shall be amortized as required under section 430(e), in the case of a multiemployer plan, the funding standard account shall be credited under section 431(b)(3)(C) with the amount of the waived funding deficiency and such amount shall be amortized as required under section 431(b)(2)(C), and in the case of a CSEC plan, the funding standard account shall be credited under section 433(b)(3)(C) with the amount of the waived funding deficiency and such amount shall be amortized as required under section 433(b)(2)(C). The Secretary may not waive under subparagraph (A) any portion of the minimum funding standard under subsection (a) for a plan year which is attributable to any waived funding deficiency for any preceding plan year. the employer is operating at an economic loss, there is substantial unemployment or underemployment in the trade or business and in the industry concerned, the sales and profits of the industry concerned are depressed or declining, and it is reasonable to expect that the plan will be continued only if the waiver is granted. For purposes of this section and part III of this subchapter, the term “waived funding deficiency” means the portion of the minimum funding standard under subsection (a) (determined without regard to the waiver) for a plan year waived by the Secretary and not satisfied by employer contributions. Except as provided in subparagraph (C), the Secretary may require an employer maintaining a defined benefit plan which is a single-employer plan (within the meaning of section 4001(a)(15) of the Employee Retirement Income Security Act of 1974) to provide security to such plan as a condition for granting or modifying a waiver under paragraph (1) or for granting an extension under section 433(d). Any security provided under clause (i) may be perfected and enforced only by the Pension Benefit Guaranty Corporation, or at the direction of the Corporation, by a contributing sponsor (within the meaning of section 4001(a)(13) of the Employee Retirement Income Security Act of 1974), or a member of such sponsor’s controlled group (within the meaning of section 4001(a)(14) of such Act). notice of the completed application for any waiver, modification, or extension, and an opportunity to comment on such application within 30 days after receipt of such notice, and any comments of the Corporation under clause (i)(II), and any views of any employee organization (within the meaning of section 3(4) of the Employee Retirement Income Security Act of 1974) representing participants in the plan which are submitted in writing to the Secretary in connection with such application. the aggregate unpaid minimum required contributions (within the meaning of section 4971(c)(4)) for the plan year and all preceding plan years, or the accumulated funding deficiency under section 433, whichever is applicable, the present value of all waiver amortization installments determined for the plan year and succeeding plan years under section 430(e)(2) or 433(b)(2)(C), whichever is applicable, and the total amounts not paid by reason of an extension in effect under section 433(d), The amount described in clause (i)(I) shall include any increase in such amount which would result if all applications for waivers or extensions with respect to the minimum funding standard under this subsection which are pending with respect to such plan were denied. In the case of a defined benefit plan which is not a multiemployer plan, no waiver may be granted under this subsection with respect to any plan for any plan year unless an application therefor is submitted to the Secretary not later than the 15th day of the 3rd month beginning after the close of such plan year. with respect to such employer, and with respect to the controlled group of which such employer is a member (determined by treating all members of such group as a single employer). The Secretary shall, before granting a waiver under this subsection, require each applicant to provide evidence satisfactory to the Secretary that the applicant has provided notice of the filing of the application for such waiver to each affected party (as defined in section 4001(a)(21) of the Employee Retirement Income Security Act of 1974). Such notice shall include a description of the extent to which the plan is funded for benefits which are guaranteed under title IV of the Employee Retirement Income Security Act of 1974 and for benefit liabilities. The Secretary shall consider any relevant information provided by a person to whom notice was given under subparagraph (A). No amendment of a plan which increases the liabilities of the plan by reason of any increase in benefits, any change in the accrual of benefits, or any change in the rate at which benefits become nonforfeitable under the plan shall be adopted if a waiver under this subsection or an extension of time under section 431(d) or section 433(d) is in effect with respect to the plan, or if a plan amendment described in subsection (d)(2) which reduces the accrued benefit of any participant has been made at any time in the preceding 12 months (24 months in the case of a multiemployer plan). If a plan is amended in violation of the preceding sentence, any such waiver, or extension of time, shall not apply to any plan year ending on or after the date on which such amendment is adopted. the Secretary determines to be reasonable and which provides for only de minimis increases in the liabilities of the plan, only repeals an amendment described in subsection (d)(2), or is required as a condition of qualification under part I of subchapter D of chapter 1. If the funding method or a plan year for a plan is changed, the change shall take effect only if approved by the Secretary. is adopted after the close of such plan year but no later than 2½ months after the close of the plan year (or, in the case of a multiemployer plan, no later than 2 years after the close of such plan year), does not reduce the accrued benefit of any participant determined as of the beginning of the first plan year to which the amendment applies, and does not reduce the accrued benefit of any participant determined as of the time of adoption except to the extent required by the circumstances, For purposes of this section, the term “controlled group” means any group treated as a single employer under subsection (b), (c), (m), or ( o ) of section 414. such plan included a trust which qualified (or was determined by the Secretary to have qualified) under section 401(a), or such plan satisfied (or was determined by the Secretary to have satisfied) the requirements of section 403(a). any profit-sharing or stock bonus plan, any insurance contract plan described in paragraph (3), any governmental plan (within the meaning of section 414(d)), any church plan (within the meaning of section 414(e)) with respect to which the election provided by section 410(d) has not been made, any plan which has not, at any time after September 2, 1974 , provided for employer contributions, or any plan established and maintained by a society, order, or association described in section 501(c)(8) or (9), if no part of the contributions to or under such plan are made by employers of participants in such plan. the plan is funded exclusively by the purchase of individual insurance contracts, such contracts provide for level annual premium payments to be paid extending not later than the retirement age for each individual participating in the plan, and commencing with the date the individual became a participant in the plan (or, in the case of an increase in benefits, commencing at the time such increase becomes effective), benefits provided by the plan are equal to the benefits provided under each contract at normal retirement age under the plan and are guaranteed by an insurance carrier (licensed under the laws of a State to do business with the plan) to the extent premiums have been paid, premiums payable for the plan year, and all prior plan years, under such contracts have been paid before lapse or there is reinstatement of the policy, no rights under such contracts have been subject to a security interest at any time during the plan year, and no policy loans are outstanding at any time during the plan year. This section applies with respect to a terminated multiemployer plan to which section 4021 of the Employee Retirement Income Security Act of 1974 applies until the last day of the plan year in which the plan terminates (within the meaning of section 4041A(a)(2) of such Act). The amendments made by this section [enacting section 432 of this title and amending this section and section 4971 of this title ] shall apply with respect to plan years beginning after 2007, except that the amendments made by subsection (b) [amending section 4971 of this title ] shall apply to taxable years beginning after 2007, but only with respect to plan years beginning after 2007 which end with or within any such taxable year. In any case in which a plan’s actuary certifies that it is reasonably expected that a multiemployer plan will be in critical status under section 432(b)(3) of the Internal Revenue Code of 1986, as added by this section, with respect to the first plan year beginning after 2007, the notice required under subparagraph (D) of such section may be provided at any time after the date of enactment [ Aug. 17, 2006 ], so long as it is provided on or before the last date for providing the notice under such subparagraph. with respect to which benefits were reduced pursuant to a plan amendment adopted on or after January 1, 2002 , and before June 30, 2005 , and which, pursuant to the plan document, the trust agreement, or a formal written communication from the plan sponsor to participants provided before June 30, 2005 , provided for the restoration of such benefits, The amendment made by this section [amending this section] shall apply to changes in assumptions for plan years beginning after October 28, 1993 . such change would have required the approval of the Secretary of the Treasury had such amendment applied to such change, and such change is not so approved.” The amendments made by this section [amending this section and section 1082 of Title 29 , Labor] shall apply to years beginning after December 31, 1987 . The Secretary of the Treasury or his delegate shall prescribe such regulations as are necessary to carry out the amendments made by this section no later than August 15, 1988 .” Except as provided in this subsection, the amendments made by this section [amending this section and section 1082 of Title 29 , Labor] shall apply with respect to plan years beginning after December 31, 1988 . The amendments made by subsections (c) [set out below] and (d) [amending this section and section 1082 of Title 29 ] shall apply with respect to years beginning after December 31, 1987 . the required percentage of the current liability under such plan, plus the amount determined under subparagraph (C)(i) for such plan year. the funded current liability percentage as of the beginning of the 1st plan year beginning after December 31, 1988 (determined without regard to any plan amendment adopted after June 30, 1987 ), plus 1 percentage point for the plan year for which the determination under this paragraph is being made and for each prior plan year beginning after December 31, 1988 , over the funded current liability percentage as of the beginning of the plan year for which such determination is being made. For purposes of subparagraph (A)(ii), the amount determined under this clause for any plan year is the amount which would be determined if the unpredictable contingent event benefit liability were amortized in equal annual installments over 10 plan years (beginning with the plan year in which such event occurs). the unpredictable contingent event benefit liability, or any amount contributed to the plan which is attributable to clause (i) (and any income allocable to such amount). such plan is maintained by a steel company, and substantially all of the employees covered by such plan are employees of such company. The term ‘steel company’ means any corporation described in section 806(b) of the Steel Import Stabilization Act [ section 806(b) of Pub. L. 98–573 , 19 U.S.C. 2253 note]. The terms ‘current liability’, ‘funded current liability percentage’, and ‘unpredictable contingent event benefit’ have the meanings given such terms by [former] section 412( l ) of the 1986 Code (as added by this section). The provisions of this paragraph shall apply in the case of a company which was originally incorporated on April 25, 1927 , in Michigan and reincorporated on June 3, 1968 , in Delaware in the same manner as if such company were a steel company.” any application submitted after December 17, 1987 , and any waiver granted pursuant to such an application. The amendments made by subsections (a)(1)(A) and (a)(2)(A) [amending this section and section 1083 of Title 29 ] shall apply to plan years beginning after December 31, 1987 . In the case of any plan year beginning during calendar 1988, [former] section 412(d)(4) of the 1986 Code and section 303(d)(1) of ERISA [ 29 U.S.C. 1083(d)(1) ] (as added by subsection (a)(1) [and (2)]) shall be applied by substituting ‘6th month’ for ‘3rd month’. The amendments made by subsection (b) [amending this section and section 1083 of Title 29 ] shall apply to waivers for plan years beginning after December 31, 1987 . For purposes of applying such amendments, the number of waivers which may be granted for plan years after December 31, 1987 , shall be determined without regard to any waivers granted for plan years beginning before January 1, 1988 . The amendments made by subsection (d) [amending this section and section 1083 of Title 29 ] shall apply to applications submitted more than 90 days after the date of the enactment of this Act [ Dec. 22, 1987 ].” a plan which is, on the date of enactment of this Act [ Dec. 8, 1994 ], subject to a restoration payment schedule order issued by the Pension Benefit Guaranty Corporation that meets the requirements of section 1.412(c)(1)–3 of the Treasury Regulations, or a plan established by an affected air carrier (as defined under section 4001(a)(14)(C)(ii)(I) of such Act [ 29 U.S.C. 1301(a)(14)(C)(ii)(I) ]) and assumed by a new plan sponsor pursuant to the terms of a written agreement with the Pension Benefit Guaranty Corporation dated January 5, 1993 , and approved by the United States Bankruptcy Court for the District of Delaware on December 30, 1992 . Any amortization installments for bases established under [former] section 412(b) of the Internal Revenue Code of 1986 and section 302(b) of the Employee Retirement Income Security Act of 1974 [ 29 U.S.C. 1082(b) ] for plan years beginning after December 31, 1987 , and before January 1, 1993 , by reason of nonelective changes under the frozen entry age actuarial cost method shall not be included in the calculation of offsets under [former] section 412( l )(1)(A)(ii) of such Code and section 302(d)(1)(A)(ii) of such Act for the 1st 5 plan years beginning after December 31, 1994 .” increases benefits, and provides for special withdrawal liability rules under section 4203(f) of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1383 [(f)]), 20 years, over the number of years since the amortization base was established.” on January 1, 1974 , the contributions under the plan were based on a percentage of pay, the actuarial assumptions with respect to pay are reasonably related to past and projected experience, and the rates of interest under the plan are determined on the basis of reasonable actuarial assumptions, In the case of a plan which makes an election under paragraph (1), the aggregate of the charges required under such paragraph for a plan year shall not be less than the interest on the unfunded past service liabilities described in clauses (i), (ii), and (iii) of [former] section 412(b)(2)(B) of the Internal Revenue Code of 1986.”