Federal Register / Vol. 73, No. 73 / Tuesday, April 15, 2008 / Proposed Rules 20203 

1Section 302 of the Employee Retirement Income 

Security Act of 1974, as amended (ERISA), sets 

forth funding rules that are parallel to those in Code 

section 412, and section 303 of ERISA sets forth 

additional funding rules for single employer plans 

that are parallel to those in section 430 of the Code. 

Under section 101 of Reorganization Plan No. 4 of 

1978 (43 FR 47713) and section 302 of ERISA, the 

Secretary of the Treasury has interpretive 

jurisdiction over the subject matter addressed in 

these proposed regulations for purposes of ERISA, 

as well as the Code. Thus, these proposed Treasury 

regulations issued under section 430 of the Code 

would apply as well for purposes of section 303 of 

ERISA. 

Further, for purposes of determining’’ is 

corrected to read ‘‘Accordingly, 

pursuant to paragraph (b)(2)(ii)(c)(3)(e), 

Branch A is treated as the location of 

manufacturing for purposes of applying 

paragraph (b)(1)(ii)(b) of this section. 

Therefore, the effective rate of tax 

imposed on the income from the sales 

of Product X is compared against the 

effective rate of tax that would apply to 

that income if it were earned in Country 

A, which would impose the highest 

effective rate of tax on the sales income 

(30%). Because the effective rate of tax 

in Country B with respect to the sales 

income (0%) is less than 90% of, and at 

least 5 percentage points less than, the 

effective rate of tax that would apply to 

such income in Country A (30%), 

Branch B, treated as the remainder of FS 

pursuant to paragraph (b)(1)(ii)(c) of this 

section, is treated as selling on behalf of 

Branch A. Further, for purposes of 

determining’’. 

24. On page 10728, column 2, 

§ 1.954–3(b)(1)(ii)(c)(3)(f) Example 5.(ii), 

lines 1 through 12 from the bottom of 

the paragraph, the language ‘‘company 

sales income. Since the location of 

manufacturing of Product X is 

considered to be the location of Branch 

A rather than Branch B, Branch B, 

treated as the remainder of FS, does not 

qualify for the manufacturing exception 

from foreign base company sales income 

contained in paragraph (a)(4) of this 

section. Since the sale of Product X is 

for use, consumption, or disposition 

outside of Country B, the income from 

the sale of Product X is foreign base 

company sales income.’’ is corrected to 

read ‘‘company sales income. Branch B, 

treated as the remainder of FS, must 

therefore independently qualify for the 

manufacturing exception from foreign 

base company sales income contained 

in paragraph (a)(4) of this section or the 

income from the sale of Product X will 

be foreign base company sales income.’’. 

25. On page 10729, column 1, 

§ 1.954–3(b)(2)(ii)(a), lines 1 through 7 

from the bottom of the paragraph, the 

language ‘‘tested against the effective 

rate of tax that would apply to such 

income if it were earned in the 

jurisdiction of such other branch or 

similar establishment or the remainder 

of the controlled foreign corporation 

under § 1.954–3(b)(1)(i)(b) or (ii)(b) of 

this section.’’ is corrected to read 

‘‘tested under the principles of § 1.954–

3(b)(1)(i)(b) or (ii)(b) of this section 

against the effective rate of tax that 

would apply to such income if it were 

earned in the jurisdiction of such other 

branch or similar establishment or the 

remainder of the controlled foreign 

corporation.’’. 

26. On page 10729, column 2, 

§ 1.954–3(b)(2)(ii)(c)(2) Example 1.(ii), 

line 6, the language ‘‘Branch A (30%), 

the seller, the remainder of’’ is corrected 

to read ‘‘Branch A (30%), the remainder 

of’’. 

27. On page 10729, column 3, 

§ 1.954–3(b)(2)(ii)(c)(2) Example 3.(i), 

line 7 from the bottom of the column, 

the language ‘‘persons. 100 percent of 

the articles sold’’ is corrected to read 

‘‘persons. One hundred percent of the 

articles sold’’. 

28. On page 10730, column 1, 

§ 1.954–3(b)(2)(ii)(c)(2) Example 3.(i), 

first paragraph of the column, line 10, 

the language ‘‘Country, but the income 

of Branch B for 1964’’ is corrected to 

read ‘‘country, but the income of Branch 

B for 1964’’. 

29. On page 10730, column 1, 

§ 1.954–3(b)(2)(ii)(d), line 10, the 

language ‘‘the last sentence of paragraph 

(a)(6), the’’ is corrected to read 

‘‘paragraph (a)(6)(i), the’’. 

LaNita Van Dyke, 

Chief, Publications and Regulations Branch, 

Legal Processing Division, Associate Chief 

Counsel (Procedure and Administration). 

[FR Doc. E8–8031 Filed 4–14–08; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Parts 1 and 54 

[REG–108508–08] 

RIN 1545–BH71 

Determination of Minimum Required 

Pension Contributions 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

and notice of public hearing. 

SUMMARY: This document contains 

proposed regulations providing 

guidance on the determination of 

minimum required contributions for 

purposes of the funding rules that apply 

to single employer defined benefit 

plans. These regulations would affect 

sponsors, administrators, participants, 

and beneficiaries of single employer 

defined benefit plans. This document 

also provides a notice of a public 

hearing on these proposed regulations. 

DATES: Written or electronic comments 

must be received by July 14, 2008. 

Outlines of topics to be discussed at the 

public hearing scheduled for August 4, 

2008, at 10 a.m. must be received by 

July 15, 2008. 

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–108508–08), room 

5203, Internal Revenue Service, PO Box 

7604, Ben Franklin Station, Washington, 

DC 20044. Submissions may be handdelivered Monday through Friday 

between the hours of 8 a.m. and 4 p.m. 

to CC:PA:LPD:PR (REG–108508–08), 

Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC, or sent 

electronically via the Federal 

eRulemaking Portal at 

www.regulations.gov (IRS–REG–

108508–08). The public hearing will be 

held in the IRS Auditorium, Internal 

Revenue Building, 1111 Constitution 

Avenue, NW., Washington, DC. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the regulations, Lauson C. 

Green or Linda S. F. Marshall at (202) 

622–6090; concerning submissions of 

comments, the hearing, and/or being 

placed on the building access list to 

attend the hearing, Richard A. Hurst, at 

Richard.A.Hurst@irscounsel.treas.gov or 

(202) 622–7180 (not toll-free numbers). 

SUPPLEMENTARY INFORMATION: 

Background 

This document contains proposed 

Income Tax Regulations (26 CFR part 1) 

under sections 430(a), 430(c), 430(e), 

and 430(j), as added to the Internal 

Revenue Code (Code) by the Pension 

Protection Act of 2006 (PPA ’06), Public 

Law 109–280 (120 Stat. 780). In 

addition, this document contains 

proposed Excise Tax Regulations (26 

CFR part 54) under section 4971. 

Section 412 provides minimum 

funding requirements that generally 

apply for pension plans (including both 

defined benefit pension plans and 

money purchase pension plans). PPA 

’06 makes extensive changes to those 

minimum funding requirements that 

generally apply for plan years beginning 

on or after January 1, 2008. Section 430, 

which was added by PPA ’06, specifies 

the minimum funding requirements that 

apply to single employer defined benefit 

pension plans (including multiple 

employer plans) pursuant to section 

412.1


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20204 Federal Register / Vol. 73, No. 73 / Tuesday, April 15, 2008 / Proposed Rules 

Section 430(a) provides that a plan’s 

minimum required contribution for a 

plan year is determined under one of 

two rules, depending on whether the 

value of plan assets is less than, or is 

equal to or greater than, the plan’s 

funding target. If the value of plan assets 

is less than the funding target, the 

minimum required contribution is the 

sum of: (1) Target normal cost; (2) any 

shortfall amortization charge; and (3) 

any waiver amortization charge. If the 

value of plan assets equals or exceeds 

the funding target, the minimum 

required contribution is the plan’s target 

normal cost, reduced (but not below 

zero) by the excess of the value of plan 

assets over the plan’s funding target. For 

purposes of section 430(a), the value of 

plan assets is determined after reduction 

for certain funding balances as provided 

under section 430(f)(4)(B). 

Section 430(c) provides that a 

shortfall amortization charge is the total 

(not less than zero) of the shortfall 

amortization installments for the plan 

year with respect to any shortfall 

amortization base established for that 

plan year and the 6 preceding plan 

years. Section 430(c)(2)(A) provides that 

the shortfall amortization installments 

with respect to a shortfall amortization 

base established for a plan year are the 

amounts necessary to amortize the 

shortfall amortization base in level 

annual installments over the 7-plan-year 

period beginning with that plan year. 

Section 430(c)(3) provides that a 

shortfall amortization base is 

determined for a plan year based on the 

plan’s funding shortfall for the plan 

year. Under section 430(c)(4), the 

funding shortfall is the amount (if any) 

by which the plan’s funding target for 

the year exceeds the value of the plan’s 

assets (as reduced by the funding 

standard carryover balance and 

prefunding balance under section 

430(f)(4)(B)). The shortfall amortization 

base for a plan year is the plan’s funding 

shortfall, minus the present value 

(determined using the interest rates 

under section 430(h)(2)) of the total of 

the shortfall amortization installments 

and waiver amortization installments 

that have been determined for the plan 

year and any succeeding plan year with 

respect to any shortfall amortization 

bases and waiver amortization bases for 

preceding plan years. 

Under section 430(c)(5), a shortfall 

amortization base is not established for 

a plan year if the value of a plan’s assets 

is at least equal to the plan’s funding 

target for the plan year. For this 

purpose, the prefunding balance is 

subtracted from the value of plan assets, 

but only if an election to use that 

prefunding balance to offset the 

minimum required contribution is in 

effect for the plan year. A transition rule 

applies for plan years beginning after 

2007 and before 2011 under which only 

a specified percentage of the plan’s 

funding target is taken into account for 

purposes of section 430(c)(5). The 

transition rule does not apply to a plan 

that is not in effect for 2007 or to a plan 

that is subject to the pre-PPA ’06 deficit 

reduction contribution rules for 2007 

(that is, a plan covering more than 100 

participants and with a funded current 

liability below the applicable 

threshold). 

Under section 430(e), the waiver 

amortization charge for a plan year is 

the total of the waiver amortization 

installments for the plan year with 

respect to any waiver amortization bases 

for the 5 preceding plan years. Under 

section 430(e)(2), the waiver 

amortization installments with respect 

to a waiver amortization base 

established for a plan year are the 

amounts necessary to amortize the 

waiver amortization base in level annual 

installments over the 5-plan-year period 

beginning with the succeeding plan 

year. Under section 430(e)(4), the waiver 

amortization base for a plan year is the 

amount of the waived funding 

deficiency (if any) for that plan year. 

If a plan’s funding shortfall for a plan 

year is zero (that is, the value of the 

plan’s assets, reduced by the funding 

standard carryover balance and 

prefunding balance to the extent 

provided under section 430(f)(4)(B), is at 

least equal to the plan’s funding target 

for the year), any shortfall amortization 

bases and waiver amortization bases for 

preceding plan years (and any 

associated shortfall amortization 

installments and waiver amortization 

installments) are eliminated. 

Under section 430(j), as under prePPA ’06 law, the due date for the 

payment of a minimum required 

contribution for a plan year is generally 

81⁄2 months after the end of the plan 

year. Any payment made on a date other 

than the valuation date for the plan year 

must be adjusted for interest accruing at 

the plan’s effective interest rate under 

section 430(h)(2)(A) for the plan year for 

the period between the valuation date 

and the payment date. Pursuant to 

section 430(g)(2), the valuation date for 

a plan year must be the first day of the 

plan year except in the case of a small 

plan described in section 430(g)(2)(B). 

Under section 430(j)(3)(A), quarterly 

contributions must be made during a 

plan year if the plan had a funding 

shortfall for the preceding plan year. 

Each quarterly installment is 25% of the 

required annual payment. The required 

annual payment is equal to the lesser of 

90% of the minimum required 

contribution under section 430 for the 

plan year or 100% of the minimum 

required contribution under section 430 

(determined without regard to any 

waiver under section 412) for the 

preceding plan year. If a quarterly 

installment is not made, the interest 

charge that applies for the period of 

underpayment is determined using the 

plan’s effective interest rate plus 5 

percentage points. The requirements 

regarding quarterly contributions are 

similar to the requirements that 

formerly applied under section 412(m) 

as in effect before amendments made by 

PPA ’06. 

Under section 430(j)(4), a plan 

sponsor of a plan that is subject to the 

quarterly contribution requirements for 

a plan year (other than a small plan 

described in section 430(g)(2)(B)) must 

make additional quarterly contributions 

in order to ensure that a minimum level 

of liquid assets is available to pay 

benefits as of the end of each quarter. 

Generally, this required minimum level 

of liquid assets is the amount of liquid 

assets needed to pay for three years of 

benefits, and an additional quarterly 

contribution (made in liquid assets) is 

due if the plan has insufficient liquid 

assets to meet this minimum level. A 

plan sponsor that fails to satisfy this 

liquidity requirement is treated as 

failing to make the required quarterly 

contribution and, pursuant to section 

206(e) of ERISA, is required to cease 

making certain types of accelerated 

payments that are described in section 

401(a)(32)(B) of the Code. Pursuant to 

section 430(j)(4)(C), the portion of an 

installment that is treated as not made 

because of the liquidity requirement 

continues to be treated as unpaid until 

the close of the quarter that contains the 

due date for the contribution. These 

liquidity requirements are substantially 

similar to the requirements that 

formerly applied under section 

412(m)(5), as in effect before 

amendments made by PPA ’06. 

Section 402 of PPA ’06 provides a 

series of special funding rules for a plan 

maintained by a commercial passenger 

airline (or by an employer whose 

principal business is providing catering 

services to a commercial passenger 

airline) if such an employer has made 

an election provided under that section. 

If an eligible employer has made the 

election described in section 402(a)(1) of 

PPA ’06 (which is only available for a 

frozen plan), the calculation of the 

minimum required contribution for the 

plan is determined using a special 17- 

plan-year amortization period and an 

interest rate of 8.85%. If an eligible 

employer has made the election 


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Federal Register / Vol. 73, No. 73 / Tuesday, April 15, 2008 / Proposed Rules 20205 

2Proposed §§ 1.430(h)(3)–1 and 1.430(h)(3)–2, 

relating to the mortality tables used to determine 

liabilities under section 430(h)(3), were issued May 

29, 2007 (REG–143601–06, 72 FR 29456), proposed 

§ 1.430(f)–1, relating to prefunding and funding 

standard carryover balances under section 430(f), 

was issued August 31, 2007 (REG–113891–07, 72 

FR 50544), and proposed §§ 1.430(d)–1, 1.430(g)–1, 

1.430(h)(2)–1, and 1.430(i)–1, relating to 

measurement of plan assets and liabilities for 

pension funding purposes, were issued December 

31, 2007 (REG–139236–07, 72 FR 74215). 

3The proposed regulations reflect the alternative 

amortization periods and interest rates that apply to 

a commercial passenger airline (or other eligible 

employer) that has made an election under section 

402 of PPA ’06. 

described in section 402(a)(2) of PPA ’06 

(which can be made without regard to 

whether the plan is frozen), calculation 

of the minimum required contribution 

for the plan is determined using a 

special 10-plan-year amortization period 

for the initial shortfall amortization base 

(that is, the shortfall amortization base 

for the first plan year for which section 

430 applies to the plan) and, pursuant 

to the amendment to section 402 of PPA 

’06 made by section 6615 of the U.S. 

Troop Readiness, Veterans’ Care, 

Katrina Recovery, and Iraq 

Accountability Appropriations Act, 

2007, Public Law 110–28 (121 Stat. 

112), an interest rate of 8.25% is used 

to determine the funding target for each 

of those 10 plan years. 

Section 4971(a) provides an excise tax 

on a failure to meet applicable 

minimum funding requirements. In the 

case of a single employer plan, the tax 

is 10% of the aggregate unpaid 

minimum required contributions for all 

plan years remaining unpaid as of the 

end of any plan year ending with or 

within a taxable year. In the case of a 

multiemployer plan, the tax is 5% of the 

accumulated funding deficiency as of 

the end of any plan year ending with or 

within the taxable year. Section 4971(b) 

provides an additional excise tax that 

applies where the applicable minimum 

funding requirements remain 

unsatisfied for a specified period. 

Section 4971(c) provides definitions 

that apply for purposes of section 4971, 

including a definition of unpaid 

minimum required contribution (which 

is based on the new section 430 rules for 

determining the minimum required 

contribution for a year). Section 4971(f) 

imposes a tax of 10% of the amount of 

the liquidity shortfall for a quarter that 

is not paid by the due date for the 

installment for that quarter. 

Regulations under section 4971 were 

issued on May 1, 1986 (TD 8084). In 

addition, proposed regulations 

regarding section 4971 were issued on 

the same date. Guidance regarding 

quarterly contribution requirements 

under former section 412(m) was issued 

in Notice 89–52 (1989–1 C.B. 692), and 

guidance regarding the liquidity 

requirements under former section 

412(m)(5) was issued in Rev. Rul. 95–31 

(1995–1 C.B. 76). See § 601.601(d)(2). 

Explanation of Provisions 

I. Overview 

These proposed regulations are the 

fourth in a series of proposed 

regulations under new section 430.2

These proposed regulations would 

provide guidance regarding the 

minimum contribution rules that apply 

to sponsors of single employer defined 

benefit plans under section 430. In 

addition, this document includes 

proposed regulations under section 

4971, reflecting changes to the excise 

tax rules under PPA ’06. 

II. Section 1.430(a)–1 Determination of 

Minimum Required Contribution 

Section 1.430(a)–1 would provide 

rules for determining the minimum 

required contribution for a single 

employer defined benefit plan 

(including a multiple employer plan 

under section 413(c)) for a plan year 

under section 430(a). The determination 

of the amount of the minimum required 

contribution for a plan year depends on 

whether the value of plan assets, as 

reduced to reflect certain funding 

balances pursuant to section 430(f)(4)(B) 

(but not below zero), equals or exceeds 

the plan’s funding target for the plan 

year. If this value of plan assets is less 

than the funding target for the plan year, 

the minimum required contribution for 

that plan year is equal to the sum of the 

plan’s target normal cost for the plan 

year plus any applicable shortfall 

amortization installments and waiver 

amortization installments. If this value 

of plan assets equals or exceeds the 

funding target for the plan year, the 

minimum required contribution for that 

plan year is equal to the target normal 

cost of the plan for the plan year 

reduced (but not below zero) by any 

such excess. 

The proposed regulations provide that 

the shortfall amortization installments 

with respect to a shortfall amortization 

base established for a plan year are the 

annual amounts necessary to amortize 

that shortfall amortization base in level 

annual installments over the 7-year 

period beginning with that plan year. As 

provided in proposed § 1.430(h)(2)–

1(f)(2), these installments are 

determined assuming that the 

installments are paid on the valuation 

date for each plan year and using the 

interest rates applicable under section 

430(h)(2)(C) or (D). The shortfall 

amortization installments are 

determined using the interest rates that 

apply for the plan year for which the 

shortfall amortization base is 

established and are not redetermined in 

subsequent plan years to reflect changes 

in interest rates under section 430(h)(2) 

for those subsequent plan years.3

Under the proposed regulations, if the 

value of plan assets (reduced by the 

prefunding balance if the prefunding 

balance is used to offset the minimum 

required contribution for the plan year 

as provided under § 1.430(f)–1(c), but 

not below zero) is equal to or greater 

than the funding target for the plan year, 

then no shortfall amortization base is 

established for that plan year. If this 

value of plan assets is less than the 

funding target for the plan year, a 

shortfall amortization base is 

established for the plan year. In such a 

case, the shortfall amortization base 

(which can be either positive or 

negative) is equal to the funding 

shortfall of the plan for the plan year, 

minus the sum of the present values of 

any remaining shortfall amortization 

installments and waiver amortization 

installments (determined in accordance 

with § 1.430(h)(2)–1(f)(2) using the 

interest rates that apply for the current 

plan year). For this purpose, the funding 

shortfall of a plan for any plan year is 

the excess (if any) of the funding target 

of the plan for the plan year, over the 

value of plan assets for the plan year (as 

reduced to reflect the subtraction of the 

funding standard carryover balance and 

prefunding balance to the extent 

provided under § 1.430(f)–1(c)). 

The proposed regulations reflect the 

transition rule under section 

430(c)(5)(B) under which only a 

specified portion of the funding target is 

taken into account in determining 

whether a shortfall amortization base is 

established for plan years beginning 

before January 1, 2011. This transition 

rule does not apply with respect to any 

plan year beginning after 2008 if a 

shortfall amortization base was required 

to be established for any preceding year, 

nor does it apply to a plan that was not 

in effect for a plan year beginning in 

2007 or to a plan that was subject to 

section 412(l) for the last plan year 

before section 430 applies to the plan 

(the pre-effective plan year), determined 

after the application of section 412(l)(6) 

and (9). The proposed regulations 

would not provide for any adjustment to 

the applicable percentages under this 

transition rule for a plan for which the 

effective date of section 430 is delayed 

under sections 104 through 106 of PPA 

‘06. 


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20206 Federal Register / Vol. 73, No. 73 / Tuesday, April 15, 2008 / Proposed Rules 

4See 29 CFR 2530.204–2(e) for rules relating to 

changes in accrual computation periods. 

5These proposed regulations do not provide rules 

for determining whether a plan has a funding 

shortfall for the 2007 plan year for purposes of 

determining whether the plan must make required 

quarterly installments for the 2008 plan year. 

Nonetheless, plans must make this determination 

on a reasonable basis. See the discussion in this 

preamble under the heading ‘‘Proposed Legislation’’

for a rule that the IRS and the Treasury Department 

are considering for this purpose. 

6 In determining required installations for the 

plan year that begins in 2008, the minimum 

required contribution for the 2007 plan year under 

section 412 is used as the minimum required 

contribution for the preceding plan year. This 

amount, which does not reflect either use of the 

credit balance or the granting of any funding 

waiver, is adjusted with interest to the end of the 

2007 plan year at the plan’s valuation interest rate 

for the 2007 plan year. 

Under the proposed regulations, the 

waiver amortization installments with 

respect to a waiver amortization base 

established for a plan year are the 

annual amounts necessary to amortize 

that waiver amortization base in level 

annual installments over the 5-year 

period beginning with the following 

plan year. As provided in proposed 

§ 1.430(h)(2)–1(f)(2), these installments 

are determined assuming that the 

installments are paid on the valuation 

date for each plan year and using the 

interest rates applicable under section 

430(h)(2). Thus, if the plan is using 

segment rates, the installments are 

determined by applying the first 

segment rate to the first four 

installments and the second segment 

rate to the fifth (and final) installment. 

The waiver amortization installments 

established with respect to a waiver 

amortization base are determined using 

the interest rates that apply for the plan 

year for which the waiver is granted 

(even though the first installment with 

respect to the waiver amortization base 

is not due until the subsequent plan 

year) and are not redetermined in 

subsequent plan years to reflect changes 

in interest rates under section 430(h)(2) 

for those subsequent plan years. A 

waiver amortization base is established 

for each plan year for which a waiver of 

the minimum funding standard has 

been granted, and the amount of that 

waiver amortization base is equal to the 

amount of the minimum required 

contribution waived (or the waived 

funding deficiency) for the plan year. 

In the case of a plan that received a 

funding waiver under section 412 for a 

plan year for which section 430 was not 

yet effective with respect to the plan, 

the proposed regulations provide that 

the waiver is treated as giving rise to a 

waiver amortization base, and the 

amortization charges with respect to 

that funding waiver are treated as 

waiver amortization installments. With 

respect to such a preexisting funding 

waiver, the amount of the annual waiver 

amortization installment is equal to the 

amortization charge with respect to that 

waiver determined using the interest 

rate or rates that applied for the preeffective plan year. Thus, for a plan that 

received a waiver in the past, the plan 

sponsor would have to contribute the 

amounts needed to amortize that waiver 

over the original schedule as previously 

established. 

In accordance with section 430(c)(6), 

the proposed regulations provide that, 

in any case in which the funding 

shortfall of a plan for a plan year is zero, 

the shortfall amortization bases for all 

preceding plan years (and all shortfall 

amortization installments determined 

with respect to those shortfall 

amortization bases) are reduced to zero, 

and the waiver amortization bases for all 

preceding plan years (and all waiver 

amortization installments determined 

with respect to such bases) are reduced 

to zero. 

The proposed regulations would 

provide rules for determining the 

amount of a minimum required 

contribution for a short plan year. Under 

the proposed regulations, the 

amortization installments are prorated 

for a short plan year. The proposed 

regulations would not provide for any 

proration of the target normal cost. 

Instead, the determination of target 

normal cost would reflect actual 

accruals that accrue or are expected to 

accrue during the plan year.4 The 

proposed regulations also provide rules 

for the treatment of installments in 

subsequent plan years to take into 

account the proration of these 

installments for short plan years and 

any change in valuation date. 

III. Section 1.430(j)–1 Payment of 

Minimum Required Contributions 

The proposed regulations under 

section 430(j) would provide rules 

related to the payment of minimum 

required contributions, including the 

payment of quarterly contributions and 

liquidity requirements. The proposed 

regulations provide that any payment of 

the minimum required contribution 

under section 430 for a plan year that 

is made on a date other than the 

valuation date for that plan year is 

adjusted for interest accruing for the 

period between the valuation date and 

the payment date, at the effective 

interest rate for the plan for that plan 

year determined pursuant to 

§ 1.430(h)(2)–1(f)(1). The direction of 

the adjustment depends on whether the 

contribution is paid before or after the 

valuation date for the plan year. If the 

contribution is paid after the valuation 

date for the plan year, the contribution 

is discounted to the valuation date using 

the plan’s effective interest rate. By 

contrast, if the contribution is paid 

before the valuation date for the plan 

year (which could only occur in the case 

of a small plan described in section 

430(g)(2)(B)), the contribution is 

increased for interest at that same 

interest rate. 

Under the proposed regulations, a 

payment of the minimum required 

contribution under section 430 for a 

plan year can be made no earlier than 

the first day of the plan year. The 

deadline for any payment of any 

minimum required contribution for a 

plan year is 81⁄2 months after the close 

of the plan year. If a minimum required 

contribution is not paid by this 

deadline, an excise tax applies under 

section 4971. 

The proposed regulations would 

provide rules for accelerated quarterly 

contributions for underfunded plans. 

These rules are similar to the rules 

provided under Notice 89–52; however, 

these rules have been updated to reflect 

statutory changes. These statutory 

changes include changes regarding 

which plans are subject to the quarterly 

contribution requirements as well as the 

interest rates applicable to missed 

quarterly contributions. 

Under the proposed regulations, in 

any case in which the plan has a 

funding shortfall for the preceding plan 

year, the employer maintaining the plan 

must make the required quarterly 

installments.5 The amount of each 

required quarterly installment is equal 

to 25% of the required annual payment. 

For this purpose, the required annual 

payment is equal to the lesser of 90% 

of the minimum required contribution 

under section 430(a) for the plan year, 

or 100% of the minimum required 

contribution under section 430(a) 

(determined without regard to any 

funding waiver under section 412) for 

the preceding plan year. These 

minimum required contributions are 

determined under section 430 as of the 

valuation date for each year and have no 

adjustment for interest.6 The proposed 

regulations provide that, for purposes of 

determining the required annual 

payment, the minimum required 

contribution for a plan year is 

determined without regard to use of the 

prefunding balance or funding standard 

carryover balance in the current year or 

any prior year. 

Pursuant to section 430(j)(3)(C), the 

proposed regulations would provide 

that the due dates for the four required 

quarterly installments with respect to a 


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7 In this context, see Department of Labor 

Interpretive Bulletin 94–3 (29 CFR 2509.94–3), 

which sets forth the Department’s view that, in the 

absence of an applicable exemption, a contribution 

by an employer to a defined benefit plan in a form 

other than cash constitutes a prohibited transaction 

under section 406 of ERISA and section 4975 of the 

Code. 

full plan year are as follows: The first 

installment is due on the 15th day of the 

4th plan month, the second installment 

is due on the 15th day of the 7th plan 

month, the third installment is due on 

the 15th day of the 10th plan month, 

and the fourth installment is due on the 

15th day following the close of the plan 

year. In the case of a short plan year, the 

proposed regulations would provide 

rules for determining the amount of the 

required annual payment, the number 

and due dates of installments, and the 

amount of those installments. The 

proposed regulations also provide rules 

for determining the plan month in the 

case of a plan year that does not begin 

on the first day of a calendar month. 

The proposed regulations would 

provide that, if the employer fails to pay 

the full amount of a required 

installment, then the rate of interest 

used to adjust the amount of the 

contribution with respect to the 

underpayment of the required 

installment for the period of time that 

begins on the due date for the required 

installment and that ends on the date of 

payment is equal to the effective interest 

rate for the plan for that plan year 

determined pursuant to § 1.430(h)(2)–

1(f)(1) plus 5 percentage points. This 

increased interest rate applies only to 

installments that are due after the 

valuation date for the plan year because 

section 430(j)(3) refers to interest being 

charged on late quarterly contributions. 

The amount of the underpayment is 

equal to the excess of the required 

installment over the amount (if any) of 

the installment contributed to or under 

the plan on or before the due date for 

the installment. For this purpose, the 

proposed regulations contain an 

ordering rule under which contributions 

are to be credited against unpaid 

required installments in the order in 

which those installments were required 

to be paid. 

As was the case in Notice 89–52, the 

proposed regulations would provide 

that a plan sponsor generally can use a 

plan’s funding balances to satisfy 

quarterly contribution requirements. 

However, this rule is subject to the new 

limitation on the use of funding 

balances by underfunded plans 

pursuant to section 430(f)(3)(C). An 

eligible plan sponsor’s election to use 

the plan’s prefunding balance and 

funding standard carryover balance 

under section 430(f) satisfies the 

obligation to make an installment on the 

date of the election, to the extent of the 

amount elected, as adjusted with 

interest at the plan’s effective interest 

rate under section 430(h)(2)(A) for the 

plan year from the valuation date 

through the due date of the installment. 

Comments are requested regarding 

whether rules should be provided under 

which a plan sponsor is deemed to 

make an election to use a funding 

balance to the extent it is available to 

avoid a failure to make any required 

quarterly installment or under which a 

plan sponsor can make a single election 

that will apply to all future quarterly 

installments until revoked. 

A plan sponsor that uses the plan’s 

prefunding balance or funding standard 

carryover balance toward satisfaction of 

the plan’s quarterly contribution 

requirement before the plan’s effective 

interest rate for the plan year has been 

determined should assume, in order to 

ensure that the quarterly contribution 

requirements are satisfied, that the 

effective interest rate is equal to the 

lowest of the three segment rates 

(generally the first segment rate) to 

adjust the elected amount. Plan 

sponsors should also note that, pursuant 

to proposed § 1.430(f)–1(b)(1)(ii)(B), the 

amount of the funding balance that is 

used to satisfy the quarterly 

contribution requirements cannot later 

be added back to the prefunding balance 

(because only contributions in excess of 

the minimum funding requirement, 

determined without regard to the offset 

under section 430(f)(3), are eligible to be 

added to the prefunding balance). 

The proposed regulations would 

provide rules for the liquidity 

requirements that generally apply to 

plans for which quarterly contributions 

are required. Under the proposed 

regulations, a plan subject to the 

requirement to make quarterly 

contributions (other than a small plan 

described in section 430(g)(2)(B)) is 

treated as failing to pay the full amount 

of the required installment for a quarter 

to the extent that the value of the liquid 

assets paid after the close of that quarter 

and on or before the due date for the 

installment is less than the liquidity 

shortfall for that quarter. Thus, in order 

to satisfy the quarterly contribution 

requirement for a quarter, liquid assets 

in the amount of the liquidity shortfall 

must be contributed after the close of 

that quarter and on or before the due 

date for the installment.7 The use of 

funding balances or the contribution of 

illiquid assets cannot remedy a liquidity 

shortfall. 

The rules under the proposed 

regulations relating to the liquidity 

requirements are similar to the rules 

provided under Rev. Rul. 95–31; 

however, these rules have been updated 

to reflect statutory changes. For 

example, the definition of liquid assets 

under the proposed regulations is the 

same as the definition of liquid assets 

under Rev. Rul. 95–31. Unlike Rev. Rul. 

95–31, the proposed regulations 

measure satisfaction of a liquidity 

shortfall by reference to contributions 

made after the close of the quarter and 

by the due date for the installment 

while including contributions made 

during the plan quarter in plan assets. 

Although this appears to be a change 

from the rules of Rev. Rul. 95–31, the 

two formulations are mathematically 

identical. 

The proposed regulations provide 

that, for purposes of applying the 

additional 5 percentage point interest 

adjustment in the case of a quarterly 

contribution that is not fully paid, the 

liquidity increment for the quarter (the 

portion of the quarterly installment that 

is due solely by reason of the liquidity 

requirements) continues to be treated as 

unpaid until the close of the quarter in 

which the due date for that installment 

occurs, regardless of when it is 

contributed. However, for purposes of 

adjusting the contribution to the 

valuation date at the effective interest 

rate, the adjustment is made from the 

actual contribution date (rather than 

from the close of the quarter). In 

addition, the proposed regulations 

provide an ordering rule under which, 

if a contribution for a quarter is less 

than the total amount needed to satisfy 

the quarterly contribution requirement 

taking into account the liquidity 

requirement, then the contribution is 

first attributed toward satisfying the 

quarterly contribution requirement 

determined without regard to the 

liquidity requirement. 

Under the proposed regulations, if the 

amount of any required installment is 

increased because of the liquidity 

shortfall rules, that increase cannot 

exceed the amount that, when added to 

prior required installments determined 

under section 430(j) for the plan year, 

would increase the funding target 

attainment percentage of the plan for the 

plan year (taking into account the 

expected increase in funding target due 

to benefits accruing or earned during the 

plan year) to 100%. 

The proposed regulations would 

provide that the rules under section 

430(j) generally apply to a plan 

maintained by a commercial passenger 

airline (or other eligible employer) that 

has made an election under section 

402(a)(1) or 402(a)(2) of PPA ’06 in the 

same manner as they apply to any other 


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8See H.R. 3361 as passed by the House of 

Representatives on March 13, 2008 and S. 1974 as 

passed by the Senate on December 19, 2007. 

plan subject to section 430. However, in 

the case of a plan with respect to which 

the election under section 402(a)(1) of 

PPA ’06 has been made, the 

determination of the funding shortfall 

for a plan year is made by reference to 

the unfunded liability under section 

402(e)(3)(A) of PPA ’06. In addition, the 

effective interest rate for a plan with 

respect to which the election under 

section 402(a)(1) of PPA ’06 has been 

made is deemed to be 8.85%. Pursuant 

to proposed § 1.430(h)(2)–1(f)(1), the 

effective interest rate for a plan with 

respect to which the election under 

section 402(a)(2) of PPA ‘06 has been 

made will be 8.25% for the 10-year 

period during which the election 

applies to the plan. 

IV. Section 54.4971(c)–1 Taxes on 

Failure To Meet Minimum Funding 

Standards 

These proposed regulations set forth 

the definitions that apply for purposes 

of applying the rules of section 4971 

that were modified by PPA ’06. 

The proposed regulations define the 

term accumulated funding deficiency 

(which is only relevant for a 

multiemployer plan) as having the 

meaning given to that term by section 

431. A multiemployer plan’s 

accumulated funding deficiency for a 

plan year takes into account all charges 

and credits to the funding standard 

account under section 412 for plan years 

before the first plan year for which 

section 431 applies to the plan. 

The proposed regulations define the 

term unpaid minimum required 

contribution, with respect to any plan 

year, as any minimum required 

contribution under section 430 for the 

plan year that is not paid on or before 

the due date for the plan year under 

section 430(j)(1). The proposed 

regulations provide that a plan’s 

accumulated funding deficiency under 

section 412 for the pre-effective plan 

year is treated as an unpaid minimum 

required contribution for that plan year 

until correction is made. Unlike the 

determination of accumulated funding 

deficiency which applied under section 

412 prior to PPA ’06, the total unpaid 

minimum required contributions is not 

adjusted with interest. However, as 

described in the following paragraph, 

correction of an unpaid minimum 

required contribution does require a 

contribution that includes an 

adjustment for interest. 

The proposed regulations define the 

term correct as it applies to the 

accumulated funding deficiency and the 

unpaid minimum required contribution 

of a plan. With respect to an 

accumulated funding deficiency under a 

multiemployer plan, the proposed 

regulations set forth rules that are the 

same as the rules set forth in proposed 

§ 54.4971–2(a). Under the proposed 

regulations, the correction of an unpaid 

minimum required contribution under a 

single employer plan for a plan year 

requires the contribution, to or under 

the plan, of the amount that, when 

discounted to the valuation date for the 

plan year for which the unpaid 

minimum required contribution is due 

at the appropriate rate of interest, equals 

or exceeds the unpaid minimum 

required contribution. For this purpose, 

the appropriate rate of interest is the 

plan’s effective interest rate for the plan 

year for which the unpaid minimum 

required contribution is due except to 

the extent that the payments are subject 

to additional interest as provided under 

section 430(j)(3) or (4). With respect to 

an unpaid minimum required 

contribution, the proposed regulations 

provide an ordering rule under which a 

contribution is attributable first to the 

earliest plan year of any unpaid 

minimum required contribution for 

which correction has not yet been made. 

With respect to an accumulated funding 

deficiency under section 412 for the preeffective plan year that is treated as an 

unpaid minimum required contribution, 

the proposed regulations provide that 

correction requires the contribution, to 

or under the plan, of the amount of that 

accumulated funding deficiency 

adjusted with interest from the end of 

the pre-effective plan year to the date of 

the contribution at the plan’s valuation 

interest rate for the pre-effective plan 

year. 

The IRS and the Treasury Department 

intend to issue further guidance in the 

future on the application of section 

4971, including special rules applicable 

to multiemployer plans that are in 

critical or endangered status under 

section 432. 

Proposed Legislation 

As of the date of the issuance of these 

proposed regulations, bills have been 

passed in the House of Representatives 

and the Senate that would provide for 

technical corrections to PPA ’06.8 These 

bills would amend section 430(j)(3)(A) 

to authorize the Treasury Department to 

provide rules for determining the 

funding shortfall for purposes of the 

pre-effective plan year and would add 

section 430(j)(3)(E)(iii) to authorize the 

Treasury Department to provide special 

rules for the treatment of quarterly 

contributions in the case of a plan with 

a valuation date other than the first day 

of the plan year. These bills would also 

specify an effective date for the PPA ’06 

amendments to section 4971. 

These proposed regulations have 

reserved § 1.430(j)–1(c)(6) and 

§ 1.430(j)–1(g)(5)(ii) in order to 

accommodate any enacted changes to 

section 430(j). If legislation similar to 

that in the proposed technical 

corrections is enacted, the IRS and the 

Treasury Department are considering 

including the following provisions in 

final regulations. First, the funding 

shortfall for the pre-effective plan year 

would be determined as the excess (if 

any) of the plan’s current liability 

determined pursuant to section 412(l)(7) 

on the valuation date for the plan’s preeffective plan year, over the net plan 

assets for the pre-effective plan year as 

determined under § 1.430(i)–1(f)(5)(ii). 

Second, if a quarterly installment is due 

before the valuation date for the plan 

year, the minimum required 

contribution for the plan year would be 

increased by an additional amount if 

that quarterly installment is not paid by 

the due date. This additional amount 

would be determined by applying 

interest at an annual rate of 5% to the 

underpayment of the required 

installment for the period of time 

between the due date for the required 

installment and the earlier of the date of 

payment or the valuation date. 

Effective/Applicability Dates of 

Regulations 

Section 430 generally applies to plan 

years beginning on or after January 1, 

2008. The proposed regulations under 

section 430 are proposed to apply 

generally to plan years beginning on or 

after January 1, 2009. When the 

regulations are finalized, plans will be 

permitted to apply them for plan years 

beginning in 2008. In addition, for plan 

years beginning in 2008, plans are 

permitted to rely on the proposed 

regulations for purposes of satisfying the 

requirements of section 430. In the case 

of a plan for which the effective date of 

section 430 is delayed in accordance 

with sections 104 through 106 of PPA 

’06, the regulations are proposed to 

apply to plan years beginning on or after 

the date section 430 first applies with 

respect to the plan. 

The amendments made to section 

4971 by section 114 of PPA ’06 do not 

have a specific effective date. The 

regulations provide that the 

amendments to section 4971 generally 

apply at the same time as the 

amendments to section 430 (or section 

431, as applicable) apply to the plan. 

Thus, the regulations provide that the 

amendments to section 4971 generally 


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apply to taxable years beginning on or 

after January 1, 2008, but only with 

respect to plan years for which section 

430 (or section 431) applies to the plan 

that end with or within any such taxable 

year. In the case of a plan to which a 

delayed effective date applies pursuant 

to sections 104 through 106 of PPA ’06, 

the regulations provide that the 

amendments made to section 4971 

apply to the same taxable years, but 

only with respect to plan years for 

which section 430 applies to the plan. 

The regulations under section 4971 

generally are proposed to apply at the 

same time the statutory changes to 

section 4971 under PPA ’06 become 

effective but would not apply to taxable 

years ending before April 15, 2008. 

Thus, for example, the regulations 

under section 4971 would not apply to 

a short taxable year beginning January 1, 

2008, and ending February 29, 2008. 

Special Analyses 

It has been determined that this notice 

of proposed rulemaking is not a 

significant regulatory action as defined 

in Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

has also been determined that section 

553(b) of the Administrative Procedure 

Act (5 U.S.C. chapter 5) does not apply 

to these regulations and, because the 

proposed regulations do not impose a 

collection of information on small 

entities, a regulatory flexibility analysis 

is not required. Pursuant to section 

7805(f) of the Code, these regulations 

have been submitted to the Chief 

Counsel for Advocacy of the Small 

Business Administration for comment 

on its impact on small business. 

Comments and Public Hearing 

Before these proposed regulations are 

adopted as final regulations, 

consideration will be given to any 

written (a signed original and eight (8) 

copies) or electronic comments that are 

submitted timely to the IRS. The IRS 

and the Treasury Department 

specifically request comments on the 

clarity of the proposed regulations and 

how they may be made easier to 

understand. All comments will be 

available for public inspection and 

copying. 

A public hearing has been scheduled 

for August 4, 2008, beginning at 10 a.m. 

in the Auditorium, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC. Due to building 

security procedures, visitors must enter 

at the Constitution Avenue entrance. In 

addition, all visitors must present photo 

identification to enter the building. 

Because of access restrictions, visitors 

will not be admitted beyond the 

immediate entrance area more than 30 

minutes before the hearing starts. For 

information about having your name 

placed on the building access list to 

attend the hearing, see the FOR FURTHER

INFORMATION CONTACT section of this 

preamble. 

The rules of 26 CFR 601.601(a)(3) 

apply to the hearing. Persons who wish 

to present oral comments at the hearing 

must submit written or electronic 

comments by July 15, 2008, and an 

outline of topics to be discussed and the 

amount of time to be devoted to each 

topic (a signed original and eight (8) 

copies) by July 15, 2008. A period of 10 

minutes will be allotted to each person 

for making comments. An agenda 

showing the scheduling of the speakers 

will be prepared after the deadline for 

receiving outlines has passed. Copies of 

the agenda will be available free of 

charge at the hearing. 

Drafting Information 

The principal authors of these 

regulations are Lauson C. Green and 

Linda S. F. Marshall, Office of Division 

Counsel/Associate Chief Counsel (Tax 

Exempt and Government Entities). 

However, other personnel from the IRS 

and the Treasury Department 

participated in the development of these 

regulations. 

List of Subjects 

26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

26 CFR Part 54 

Excise taxes, Insurance, Reporting and 

recordkeeping requirements. 

Proposed Amendments to the 

Regulations 

Accordingly, 26 CFR part 1 is 

proposed to be amended as follows: 

PART 1—INCOME TAXES 

Paragraph 1. The authority citation 

for part 1 continues to read in part as 

follows: 

Authority: 26 U.S.C. 7805 * * * 

Par. 2. Section 1.430(a)–1 is added to 

read as follows: 

§ 1.430(a)–1 Determination of minimum 

required contribution. 

(a) In general—(1) Overview. This 

section sets forth rules for determining 

a plan’s minimum required contribution 

for a plan year under section 430(a). 

Section 430 and this section apply to 

single employer defined benefit plans 

(including multiple employer plans as 

defined in section 413(c)) that are 

subject to section 412 but do not apply 

to multiemployer plans (as defined in 

section 414(f)). Paragraph (b) of this 

section defines a plan’s minimum 

required contribution for a plan year. 

Paragraph (c) of this section provides 

rules for determining shortfall 

amortization installments. Paragraph (d) 

of this section provides rules for 

determining waiver amortization 

installments. Paragraph (e) of this 

section provides for early deemed 

amortization of shortfall and waiver 

amortization bases for fully funded 

plans. Paragraph (f) of this section 

provides definitions that apply for 

purposes of this section. Paragraph (g) of 

this section provides examples that 

illustrate the application of this section. 

Paragraph (h) of this section provides 

effective/applicability dates and 

transition rules. 

(2) Special rules for multiple 

employer plans. In the case of a multiple 

employer plan to which section 

413(c)(4)(A) applies, the rules of section 

430 and this section are applied 

separately for each employer under the 

plan, as if each employer maintained a 

separate plan. Thus, the minimum 

required contribution is computed 

separately for each employer under such 

a multiple employer plan. In the case of 

a multiple employer plan to which 

section 413(c)(4)(A) does not apply (that 

is, a plan described in section 

413(c)(4)(B) that has not made the 

election for section 413(c)(4)(A) to 

apply), the rules of section 430 and this 

section are applied as if all participants 

in the plan were employed by a single 

employer. 

(b) Definition of minimum required 

contribution—(1) In general. In the case 

of a defined benefit plan that is not a 

multiemployer plan (within the 

meaning of section 414(f)), except as 

offset under section 430(f) and 

§ 1.430(f)–1, the minimum required 

contribution for a plan year is 

determined as the applicable amount 

determined under paragraph (b)(2) of 

this section or paragraph (b)(3) of this 

section, reduced by the amount of any 

funding waiver under section 412(c) 

that is granted for the plan year. See 

paragraph (b)(4) of this section for 

special rules for a plan maintained by a 

commercial passenger airline (or other 

eligible employer) for which an election 

under section 402 of the Pension 

Protection Act of 2006, Public Law 109–

280 (120 Stat. 780) (PPA ’06), has been 

made, and see section 430(j) and 

§ 1.430(j)–1 for rules regarding the 

required interest adjustment for a 

contribution that is paid on a date other 

than the valuation date for the plan 

year. 


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(2) Plan assets less than funding 

target—(i) General rule. For any plan 

year in which the value of plan assets 

of the plan (as reduced to reflect the 

subtraction of certain funding balances 

as provided under § 1.430(f)–1(c), but 

not below zero) is less than the funding 

target of the plan for the plan year, the 

minimum required contribution for that 

plan year is equal to the sum of—

(A) The target normal cost of the plan 

for the plan year; 

(B) The total (not less than zero) of the 

shortfall amortization installments 

determined with respect to the shortfall 

amortization bases for the plan year and 

each of the 6 preceding plan years as 

described in paragraph (c) of this 

section; and 

(C) The total of the waiver 

amortization installments determined 

with respect to the waiver amortization 

bases for each of the 5 preceding plan 

years as described in paragraph (d) of 

this section. 

(ii) Special rule for short plan years—

(A) Proration of amortization 

installments. In determining the 

minimum required contribution in the 

case of a plan year that is shorter than 

12 months (and is not a 52-week plan 

year of a plan that uses a 52–53 week 

plan year), the shortfall amortization 

installments and waiver amortization 

installments that are taken into account 

under paragraphs (b)(2)(i)(B) and (C) of 

this section are determined by 

multiplying the amount of those 

installments that would be taken into 

account for a 12-month plan year by a 

fraction, the numerator of which is the 

duration of the short plan year and the 

denominator of which is 1 year. 

(B) Effect on subsequent years. In plan 

years after the short plan year, 

installments with respect to a shortfall 

amortization base (or waiver 

amortization base) continue to be taken 

into account under paragraphs 

(b)(2)(i)(B) and (C) of this section until 

the total amount of those installments, 

as originally determined to be paid over 

7 years (or 5 years in the case of waiver 

amortization installments), has been 

taken into account. Thus, for example, 

in the case of a plan that has a short 

plan year, an additional partial 

installment will be taken into account 

under paragraphs (b)(2)(i)(B) and (C) of 

this section during the plan year after 

the end of the original amortization 

period in an amount determined so that 

the total of the amortization 

installments (including the prorated 

installment payable for the short plan 

year and the additional partial 

installment) is equal to the total amount 

of the amortization installments as 

originally determined. Similarly, in the 

case of a plan that has a short plan year, 

the total number of plan years required 

to take into account the full amount of 

installments will exceed 7 plan years (or 

5 plan years in the case of waiver 

amortization installments), and, 

accordingly, the number of preceding 

plan years taken into account in 

paragraphs (b)(2)(i)(B) and (C) of this 

section is correspondingly increased so 

that the total amount of the amortization 

installments as originally determined is 

taken into account. In addition, for plan 

years beginning after the close of the 

short plan year, the shortfall 

amortization installments and waiver 

amortization installments that are taken 

into account under paragraphs 

(b)(2)(i)(B) and (C) of this section are 

assumed to be paid on the valuation 

date for the new plan year (rather than 

on the valuation date for the short plan 

year and preceding plan years). 

(3) Plan assets equal or exceed 

funding target. For any plan year in 

which the value of plan assets (as 

reduced to reflect the subtraction of 

certain funding balances as provided 

under § 1.430(f)–1(c), but not below 

zero) equals or exceeds the funding 

target of the plan for the plan year, the 

minimum required contribution for that 

plan year is equal to the target normal 

cost of the plan for the plan year 

reduced (but not below zero) by that 

excess. 

(4) Special rules for commercial 

passenger airlines—(i) In general. This 

paragraph (b)(4) provides special rules 

for a plan maintained by a commercial 

passenger airline (or an employer whose 

principal business is providing catering 

services to a commercial passenger 

airline) for which an election under 

section 402 of PPA ’06 has been made. 

(ii) Frozen plans—(A) Determinations 

during 17-year amortization period. If 

an election described in section 

402(a)(1) of PPA ’06 applies for the plan 

year with respect to an eligible plan 

described in section 402(c)(1) of PPA 

’06, then the plan’s minimum required 

contribution for purposes of section 430 

of the Code for the plan year is equal to 

the amount necessary to amortize (at an 

interest rate of 8.85 percent) the 

unfunded liability of the plan in equal 

installments over the remaining 

amortization period. For this purpose, 

the unfunded liability means the excess 

of the accrued liability under the plan 

determined using the unit credit 

funding method and an interest rate of 

8.85 percent over the fair market value 

of assets, and the remaining 

amortization period is the 17-plan-year 

period beginning with the first plan year 

for which the election was made, 

reduced by 1 year for each plan year 

after the first plan year for which the 

election was made. In addition, the 

section 430(f)(3) election to apply 

funding balances against the minimum 

required contribution does not apply to 

a plan to which the election described 

in section 402(a)(1) of PPA ’06 applies 

for the plan year. 

(B) Determinations following 17-year 

amortization period. If an election 

described in section 402(a)(1) of PPA ’06 

applied to the plan for any preceding 

plan year but does not apply for the 

current plan year, then the plan’s 

minimum required contribution for 

purposes of section 430 of the Code for 

the plan year is determined without 

regard to that election. For the first plan 

year for which that election no longer 

applies to the plan, any prefunding 

balance or funding standard carryover 

balance is reduced to zero. 

(iii) Other plans of commercial 

passenger airlines. If an election 

described in section 402(a)(2) of PPA ’06 

has been made for an eligible plan 

described in section 402(c)(1) of PPA 

’06, then the minimum required 

contribution for purposes of section 430 

is determined under generally 

applicable rules, except that the 

shortfall amortization base for the first 

plan year for which section 430 applies 

to the plan is amortized over 10 years 

(rather than over 7 years as provided in 

paragraph (c)(1) of this section) in 

accordance with § 1.430(h)(2)–1(e) and 

(f) using the interest rates that apply for 

the first plan year for which section 430 

applies to the plan. In such a case, the 

shortfall amortization installments with 

respect to the shortfall amortization base 

for that plan year will continue to be 

included in determining the minimum 

required contribution for 10 years rather 

than 7 years. See also § 1.430(h)(2)–

1(b)(6) for a special rule for determining 

the funding target in the case of a plan 

for which an election under section 

402(a)(2) of PPA ’06 has been made. 

(c) Shortfall amortization 

installments—(1) In general. For 

purposes of this section, the shortfall 

amortization installments with respect 

to a shortfall amortization base 

established for a plan year are the 

annual amounts necessary to amortize 

that shortfall amortization base in level 

annual installments over the 7-year 

period beginning with that plan year. 

See § 1.430(h)(2)–1(e) and (f) for rules 

regarding interest rates used for 

determining shortfall amortization 

installments and the date within each 

plan year on which the installments are 

assumed to be paid. The shortfall 

amortization installments are 

determined using the interest rates that 

apply for the plan year for which the 


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shortfall amortization base is 

established and are not redetermined in 

subsequent plan years to reflect changes 

in interest rates under section 430(h)(2) 

for those subsequent plan years. 

(2) Shortfall amortization base—(i) In 

general. For purposes of this section, 

unless the value of plan assets (as 

reduced to reflect the subtraction of 

certain funding balances as provided 

under § 1.430(f)–1(c)(2), but not below 

zero) is equal to or greater than the 

funding target of the plan for the plan 

year, a shortfall amortization base is 

established for the plan year equal to—

(A) The funding shortfall of the plan 

for the plan year; minus 

(B) The amount attributable to future 

installments determined under 

paragraph (c)(2)(ii) of this section. 

(ii) Amount attributable to future 

installments. The amount attributable to 

future installments is equal to the sum 

of the present values (determined in 

accordance with § 1.430(h)(2)–1(e) and 

(f) using the interest rates that apply for 

the current plan year) of—

(A) The shortfall amortization 

installments that have been determined 

for the plan year and any succeeding 

plan year with respect to the shortfall 

amortization bases of the plan for any 

plan year preceding the plan year; and 

(B) The waiver amortization 

installments that have been determined 

for the plan year and any succeeding 

plan year with respect to the waiver 

amortization bases of the plan for any 

plan year preceding the plan year. 

(iii) Transition rule. See paragraph 

(h)(4) of this section for a transition rule 

under which only a portion of the 

funding target is taken into account in 

determining whether a shortfall 

amortization base is established under 

this paragraph (c)(2). 

(d) Waiver amortization 

installments—(1) In general. For 

purposes of this section, the waiver 

amortization installments with respect 

to a waiver amortization base 

established for a plan year are the 

annual amounts necessary to amortize 

that waiver amortization base in level 

annual installments over the 5-year 

period beginning with the following 

plan year. See § 1.430(h)(2)–1(e) and (f) 

for rules regarding interest rates used for 

determining waiver amortization 

installments and the date within each 

plan year on which the installments are 

assumed to be paid. The waiver 

amortization installments established 

with respect to a waiver amortization 

base are determined using the interest 

rates that apply for the plan year for 

which the waiver is granted (even 

though the first installment with respect 

to the waiver amortization base is not 

due until the subsequent plan year) and 

are not redetermined in subsequent plan 

years to reflect changes in interest rates 

under section 430(h)(2) for those 

subsequent plan years. 

(2) Waiver amortization base—(i) In 

general. For purposes of this section, a 

waiver amortization base is established 

for each plan year for which a waiver of 

the minimum funding standard has 

been granted in accordance with section 

412(c). The amount of the waiver 

amortization base is equal to the amount 

of the minimum required contribution 

waived (or the waived funding 

deficiency) for the plan year. 

(ii) Transition rule. See paragraph 

(h)(3) of this section for the treatment of 

funding waivers granted for plan years 

beginning before 2008. 

(e) Early deemed amortization upon 

attainment of funding target. In any case 

in which the funding shortfall of a plan 

for a plan year is zero—

(1) The shortfall amortization bases 

for all preceding plan years (and all 

shortfall amortization installments 

determined with respect to those 

shortfall amortization bases) are reduced 

to zero; and 

(2) The waiver amortization bases for 

all preceding plan years (and all waiver 

amortization installments determined 

with respect to such bases) are reduced 

to zero. 

(f) Definitions—(1) In general. The 

definitions set forth in this paragraph (f) 

apply for purposes of this section. 

(2) Funding shortfall. The term 

funding shortfall means the excess (if 

any) of—

(i) The funding target of the plan for 

a plan year; over 

(ii) The value of plan assets for the 

plan year (as reduced to reflect the 

subtraction of the funding standard 

carryover balance and prefunding 

balance to the extent provided under 

§ 1.430(f)–1(c), but not below zero). 

(3) Funding target. The term funding 

target means the plan’s funding target 

for a plan year determined under 

§ 1.430(d)–1(b)(2), § 1.430(i)–1(c), or 

§ 1.430(i)–1(e)(1), whichever applies to 

the plan for the plan year. 

(4) Target normal cost. The term 

target normal cost means the plan’s 

target normal cost for a plan year 

determined under § 1.430(d)–1(b)(1), 

§ 1.430(i)–1(d), or § 1.430(i)–1(e)(2), 

whichever applies to the plan for the 

plan year. 

(g) Examples. The following examples 

illustrate the rules of this section. 

Unless otherwise indicated, these 

examples are based on the following 

assumptions: the plan is subject to 

section 430 starting in 2008; the plan 

year is the calendar year; the valuation 

date is January 1; and the plan’s funding 

standard carryover balance is $0. 

Example 1. (i) Plan A has a funding target 

of $2,500,000 and assets totaling $1,800,000 

as of January 1, 2008. The 2008 actuarial 

valuation is performed using the 24-month 

average segment rates applicable for 

September 2007 (determined without regard 

to the transitional rule of section 

430(h)(2)(G)). 

(ii) A $700,000 shortfall amortization base 

is established for 2008, which is equal to the 

$2,500,000 funding target less $1,800,000 of 

assets. 

(iii) With respect to this shortfall 

amortization base of $700,000, there is a 

shortfall amortization installment of 

$116,852 (which is equal to the $700,000 

shortfall amortization base amortized over 7 

years) for each year from 2008 through 2014. 

The amount of this shortfall amortization 

installment is determined by discounting the 

first five installments using the first segment 

interest rate of 5.26%, and by discounting the 

sixth and seventh installments using the 

second segment rate of 5.82%. 

Example 2. (i) The facts are the same as in 

Example 1, except that the plan was granted 

a funding waiver of $300,000 in 2006, as of 

December 31, 2006. The valuation interest 

rate for the January 1, 2007, actuarial 

valuation is 8.50% (which exceeds 150% of 

the applicable federal mid-term rate). 

(ii) The waiver amortization installment for 

the plan year beginning January 1, 2007, is 

$70,166, which is equal to the $300,000 

funding waiver base amortized over 5 years 

at the valuation interest rate of 8.50%. 

(iii) As of January 1, 2008, the present 

value of the remaining waiver amortization 

installments is $260,318, which is 

determined by discounting the remaining 

four waiver amortization installments of 

$70,166 to January 1, 2008, using the first 

segment rate of 5.26%. See paragraph (h)(3) 

of this section. 

(iv) A $439,682 shortfall amortization base 

is established for 2008, which is equal to the 

$2,500,000 funding target, less $1,800,000 of 

assets, less $260,318 (which is the present 

value of the remaining waiver amortization 

installments). 

(v) With respect to this shortfall 

amortization base of $439,682, there is a 

shortfall amortization installment of $73,397 

(which is equal to the $439,682 shortfall 

amortization base amortized over 7 years) for 

each year from 2008 through 2014. 

Example 3. (i) The facts are the same as in 

Example 2. Plan A has a $100,000 target 

normal cost for the 2008 plan year and was 

granted a funding waiver for 2008 to the 

largest extent permitted under section 412(c). 

(ii) The minimum required contribution is 

$243,563 as of January 1, 2008. This is equal 

to the $100,000 target normal cost, plus the 

$70,166 waiver amortization installment 

from the 2006 waiver, plus the $73,397 

January 1, 2008, shortfall amortization 

installment. 

(iii) In accordance with section 

412(c)(1)(C), the portion of the minimum 

required contribution attributable to the 

amortization of the 2006 funding waiver 

cannot be waived. Therefore, the maximum 

amount of the January 1, 2008, minimum 


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required contribution that can be waived is 

$173,397. 

(iv) In accordance with paragraph (d) of 

this section, a waiver amortization base of 

$173,397 is established as of January 1, 2008, 

to be amortized over 5 years beginning with 

the 2009 plan year. Although the waiver 

amortization installments for the 2008 

funding waiver are not included in the 

minimum required contribution until 2009, 

the amount of those installments is 

determined based on the interest rates used 

for the 2008 plan year. 

(v) The waiver amortization installments 

are calculated using the first segment interest 

rate of 5.26% for the first four installments 

(calculated as of January 1, 2009, through 

January 1, 2012) and the second segment 

interest rate of 5.82% for the final installment 

payable as of January 1, 2013. Accordingly, 

the waiver amortization installments that are 

payable beginning January 1, 2009, are 

$40,530 each. 

Example 4. (i) The facts are the same as in 

Example 3. As of January 1, 2009, Plan A has 

a funding target of $2,750,000 and assets 

totaling $1,900,000. The 2009 actuarial 

valuation is performed using the 24-month 

average segment rates applicable for 

September 2008 (determined without regard 

to the transitional rule of section 

430(h)(2)(G)). For the 2009 plan year, the first 

segment rate is equal to 5.50%, the second 

segment rate is equal to 6.00%, and the third 

segment rate is equal to 6.50%. 

(ii) As of January 1, 2009, the present value 

of the remaining three waiver amortization 

installments with respect to the 2006 waiver 

is $199,715, which is determined using the 

first segment rate of 5.50%. 

(iii) As of January 1, 2009, the present 

value of the remaining five waiver 

amortization installments with respect to the 

2008 waiver is $182,594, which is 

determined using the first segment rate of 

5.50%. 

(iv) As of January 1, 2009, the present 

value of the remaining six shortfall 

amortization installments with respect to the 

2008 shortfall amortization base is $385,511, 

which is determined using the first segment 

rate of 5.50% for the first five installments 

and the second segment rate of 6.00% for the 

sixth installment. 

(v) A shortfall amortization base of $82,180 

is established for 2009, which is equal to the 

$2,750,000 funding target, less $1,900,000 of 

assets, less $199,715 (the present value of the 

remaining waiver amortization installments 

with respect to the 2006 waiver), less 

$182,594 (the present value of the remaining 

waiver amortization installments with 

respect to the 2008 waiver), less $385,511 

(the present value of the remaining 

installments with respect to the 2008 

shortfall amortization base). 

(vi) With respect to this shortfall 

amortization base of $82,180, there is a 

shortfall amortization installment of $13,795 

(which is equal to the $82,180 shortfall 

amortization base amortized over 7 years) for 

each year from 2009 through 2015. 

Example 5. (i) The facts are the same as in 

Example 4, except that Plan A has assets 

totaling $2,000,000 as of January 1, 2009. 

Plan A has a target normal cost of $110,000 

as of January 1, 2009. 

(ii) A shortfall amortization base of 

¥$17,820 is established for 2009, which is 

equal to the $2,750,000 funding target, less 

$2,000,000 of assets, less $199,715 (the 

present value of the remaining installments 

with respect to the 2006 waiver), less 

$182,594 (the present value of the remaining 

installments with respect to the 2008 waiver), 

less $385,511 (the present value of the 

remaining installments with respect to the 

2008 shortfall amortization base). 

(iii) The shortfall amortization installment 

for the 2009 shortfall amortization base is 

¥$2,991, which is equal to the ¥$17,820 

shortfall amortization base amortized over 7 

years. The first five shortfall amortization 

installments are discounted using the first 

segment rate of 5.50% and the sixth and 

seventh shortfall amortization installments 

are discounted using the second segment rate 

of 6.00%. 

(iv) The minimum required contribution 

for the 2009 plan year is $291,102. This is 

equal to the target normal cost of $110,000 

plus the shortfall amortization charge of 

$70,406 (that is, $73,397 minus $2,991) plus 

the waiver amortization charge of $110,696 

(that is, $70,166 plus $40,530). 

Example 6. (i) The facts are the same as in 

Example 5, except that Plan A has assets 

totaling $2,800,000 as of January 1, 2009. 

(ii) Because the assets of $2,800,000 exceed 

the funding target of $2,750,000 as of January 

1, 2009, no new shortfall amortization base 

is established under paragraph (c)(2) of this 

section. 

(iii) Furthermore, under paragraph (e) of 

this section, all shortfall amortization bases 

and waiver amortization bases (and all 

shortfall amortization installments and 

waiver amortization installments associated 

with those bases) are reduced to zero as of 

January 1, 2009. 

(iv) The minimum required contribution 

for the 2009 plan year is $60,000, which is 

equal to the $110,000 target normal cost less 

the excess of the assets over the funding 

target ($2,800,000 minus $2,750,000). 

Example 7. (i) The actuarial valuation for 

Plan B as of January 1, 2008, based on a 12- 

month plan year, determines a target normal 

cost of $110,000 and a shortfall amortization 

installment for 2008 of $185,000. The plan 

year for Plan B is changed to April 1 through 

March 31, effective April 1, 2008, resulting 

in a short plan year beginning January 1, 

2008, and ending March 31, 2008. 

(ii) The target normal cost for the short 

plan year is redetermined in order to reflect 

the fact that there is a short plan year. An 

actuarial valuation shows that the target 

normal cost is $25,000 for the short plan year 

based on the accruals for that short plan year 

(determined in accordance with 29 CFR 

§ 2530.204–2(e)). 

(iii) In accordance with paragraph 

(b)(2)(ii)(A) of this section, the shortfall 

amortization base is prorated to reflect the 

three months covered by the short plan year. 

Accordingly, the shortfall amortization 

installment for the short plan year is $46,250 

(that is, $185,000 multiplied by 3/12). 

(iv) The total minimum required 

contribution for the short plan year (without 

offset for any carryover balance as of January 

1, 2008) is $71,250 (that is, the sum of the 

target normal cost of $25,000 plus the 

shortfall amortization installment of 

$46,250). 

Example 8. (i) The facts are the same as in 

Example 7. The first segment rate for the plan 

year beginning April 1, 2008, is 5.30%, and 

the second segment rate is 5.80%. 

(ii) The present value of the remaining 

shortfall amortization installments with 

respect to the January 1, 2008, shortfall 

amortization base is equal to $1,074,937. 

This is determined by discounting the 

remaining installments (6 full-year 

installments due April 1, 2008 through April 

1, 2013, and a final 9-month installment due 

April 1, 2014) using the first segment rate of 

5.30% for the first five installments and the 

second segment rate of 5.80% for the 

remaining installments. 

(h) Effective/applicability dates and 

transition rules—(1) In general. Section 

430 generally applies to plan years 

beginning on or after January 1, 2008. In 

general, this section applies to plan 

years beginning on or after January 1, 

2009. However, plans are permitted to 

apply this section in determining the 

minimum required contribution for plan 

years beginning in 2008. 

(2) Plans with delayed effective date. 

In the case of a plan for which the 

effective date of section 430 is delayed 

in accordance with sections 104 through 

106 of PPA ’06, this section applies to 

plan years beginning on or after the date 

section 430 first applies with respect to 

the plan. 

(3) Treatment of pre-2008 funding 

waivers. In the case of a plan that has 

received a funding waiver under section 

412 for a plan year for which section 

430 was not yet effective with respect to 

the plan, the waiver is treated as giving 

rise to a waiver amortization base and 

the amortization charges with respect to 

that funding waiver are treated as 

waiver amortization installments as 

described in paragraph (d) of this 

section. With respect to such a 

preexisting funding waiver, the amount 

of the waiver amortization installment is 

equal to the amortization charge with 

respect to that waiver determined using 

the interest rate or rates that applied for 

the pre-effective plan year. 

(4) Transition rule for determining 

whether shortfall amortization base is 

established—(i) In general. Except as 

provided in paragraphs (h)(4)(iii) and 

(iv) of this section, in the case of plan 

years beginning after 2007 and before 

2011, only the applicable percentage of 

the funding target is taken into account 

in determining whether a shortfall 

amortization base is established for the 

plan year under paragraph (c)(2) of this 

section. 

(ii) Applicable percentage. For 

purposes of paragraph (h)(4)(i) of this 

section, the applicable percentage is 


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determined in accordance with the 

following table: 

Calendar year in which the plan 

year begins 

Applicable 

percentage 

2008 .......................................... 92 

2009 .......................................... 94 

2010 .......................................... 96 

(iii) Transition rule not available if 

funding falls below applicable 

percentage. The transition rule of 

paragraph (h)(4)(i) of this section does 

not apply with respect to any plan year 

beginning after 2008 if a shortfall 

amortization base was required to be 

established under paragraph (c)(2) of 

this section for any preceding year. 

(iv) Transition rule not available for 

new plans or deficit reduction plans. 

The transition rule of paragraph (h)(4)(i) 

of this section does not apply to a 

plan—

(A) That was not in effect for a plan 

year beginning in 2007; or 

(B) That was subject to section 412(l) 

for the pre-effective plan year, 

determined after the application of 

sections 412(l)(6) and (9) (regardless of 

whether the deficit reduction 

contribution for the pre-effective plan 

year was equal to zero). 

(v) Pre-effective plan year. For 

purposes of this section, the preeffective plan year for a plan is the last 

plan year beginning before section 430 

applies to the plan. Thus, except for 

plans with a delayed effective date 

under paragraph (h)(2) of this section, 

the pre-effective plan year for a plan is 

the last plan year beginning before 

January 1, 2008. 

Par. 3. Section 1.430(j)–1 is added to 

read as follows: 

§ 1.430(j)–1 Payment of minimum required 

contributions. 

(a) In general—(1) Overview. This 

section provides rules related to the 

payment of minimum required 

contributions, including the payment of 

quarterly contributions. Section 430(j) 

and this section apply to single 

employer defined benefit plans 

(including multiple employer plans as 

defined in section 413(c)) but do not 

apply to multiemployer plans (as 

defined in section 414(f)). Paragraph (b) 

of this section describes the general 

timing requirement for minimum 

required contributions. Paragraph (c) of 

this section describes the accelerated 

quarterly contribution schedule for 

plans with a funding shortfall in the 

preceding plan year. Paragraph (d) of 

this section provides rules regarding 

liquidity requirements. Paragraph (e) of 

this section provides definitions. 

Paragraph (f) of this section provides 

examples that illustrate the rules of this 

section. Paragraph (g) of this section sets 

forth effective/applicability dates and 

transition rules. 

(2) Special rules for multiple 

employer plans. In the case of a multiple 

employer plan to which section 

413(c)(4)(A) applies, the rules of section 

430 and this section are applied 

separately for each employer under the 

plan, as if each employer maintained a 

separate plan. Thus, for example, 

required quarterly contributions are 

determined separately for each 

employer under such a multiple 

employer plan. In the case of a multiple 

employer plan to which section 

413(c)(4)(A) does not apply (that is, a 

plan described in section 413(c)(4)(B) 

that has not made the election for 

section 413(c)(4)(A) to apply), the rules 

of section 430 and this section are 

applied as if all participants in the plan 

were employed by a single employer. 

(3) Applicability of section 430(j) to 

plans of commercial passenger 

airlines—(i) In general. Except as 

otherwise provided in this section, the 

rules of section 430(j) and this section 

apply to a plan for which an election 

described in section 402 of the Pension 

Protection Act of 2006, Public Law 109–

280 (120 Stat. 780) (PPA ’06), has been 

made in the same manner as those rules 

apply to any other plan subject to 

section 430. 

(ii) Special rules for plans for which 

election was made pursuant to section 

402(a)(1) of PPA ’06. For purposes of 

applying the rules of section 430(j) and 

this section to a plan with respect to 

which the election under section 

402(a)(1) of PPA 06 has been made, the 

effective interest rate for the plan is 

deemed to be 8.85% during the period 

for which the election applies. In 

addition, see paragraph (e)(4)(ii) of this 

section for a special determination of 

the funding shortfall for a plan for 

which the election in section 402(a)(1) 

of PPA ’06 has been made. 

(b) General timing requirement for 

minimum required contributions—(1) 

Earliest date for contributions. A 

payment of the minimum required 

contribution under section 430 for a 

plan year can be made no earlier than 

the first day of the plan year. 

(2) Deadline for contributions. The 

deadline for any payment of any 

minimum required contribution for a 

plan year is 81⁄2 months after the close 

of the plan year. See section 4971 and 

the regulations thereunder regarding an 

excise tax that applies with respect to 

minimum required contributions not 

paid by this deadline. See also section 

430(k) of the Code and section 101(d) of 

the Employee Retirement Income 

Security Act of 1974 (ERISA), 29 U.S.C. 

1021(d), for additional rules that apply 

in the case of a failure to pay minimum 

required contributions by this deadline. 

(3) Adjustment for interest. Any 

payment of the minimum required 

contribution under section 430 for a 

plan year that is made on a date other 

than the valuation date for that plan 

year is adjusted for interest accruing for 

the period between the valuation date 

and the payment date, at the effective 

interest rate for the plan for that plan 

year determined pursuant to 

§ 1.430(h)(2)–1(f)(1). The direction of 

the adjustment depends on whether the 

contribution is paid before or after the 

valuation date for the plan year. If the 

contribution is paid after the valuation 

date for the plan year, the contribution 

is discounted to the valuation date using 

the plan’s effective interest rate. By 

contrast, if the contribution is paid 

before the valuation date for the plan 

year (which could only occur in the case 

of a small plan described in section 

430(g)(2)(B)), the contribution is 

increased for interest using the plan’s 

effective interest rate. 

(c) Accelerated quarterly contribution 

schedule for underfunded plans—(1) In 

general—(i) Plan subject to quarterly 

contribution requirement. In any case in 

which the plan has a funding shortfall 

for the preceding plan year, the 

employer maintaining the plan shall 

make the required installments 

described in paragraph (c)(3) of this 

section by the due dates described in 

paragraph (c)(4) of this section. 

(ii) Satisfaction of installments 

through use of funding balances. In the 

case of a plan that is subject to the 

quarterly contribution requirement 

under this paragraph (c), if the plan 

sponsor makes an election to use the 

plan’s prefunding balance or funding 

standard carryover balance under 

section 430(f), then the plan sponsor is 

treated as satisfying the obligation to 

make a required installment under 

paragraph (c)(1)(i) of this section on the 

date of the election to the extent of the 

amount elected, as adjusted with 

interest. This interest adjustment is 

made at the plan’s effective interest rate 

under section 430(h)(2)(A) for the plan 

year from the valuation date through the 

due date of the installment. 

(iii) Consequences of failure to make 

quarterly contribution—(A) Interest 

adjustment. If the full amount of a 

required installment is not paid by the 

due date for that installment, then an 

increased rate of interest applies in 

adjusting the payment to the valuation 

date. This increased rate of interest is 

equal to the rate otherwise used under 

paragraph (b) of this section plus 5 


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percentage points, and applies with 

respect to the underpayment of the 

required installment (determined 

pursuant to paragraph (c)(2) of this 

section) for the period of time that 

begins on the due date for the required 

installment and that ends on the date on 

which payment is made. 

(B) Application to required 

installments due before the valuation 

date. The modified interest rate 

described in paragraph (c)(1)(iii)(A) of 

this section only applies to a required 

installment that is due on or after the 

valuation date for the plan year. See 

paragraph (c)(6) of this section for rules 

that apply to required installments that 

are due before the valuation date for the 

plan year. 

(C) Additional consequences. See 

section 430(k) of the Code and section 

101(d) of ERISA for examples of 

additional consequences of failure to 

make quarterly contributions. 

(2) Determination of underpayment—

(i) Underpayment for a quarter. For 

purposes of this section, the amount of 

the underpayment with respect to a 

required installment for a quarter is 

equal to the excess of—

(A) The required installment; over 

(B) The amount (if any) of the 

installment contributed to or under the 

plan on or before the due date for the 

installment. 

(ii) Order of crediting contributions. 

For purposes of this section, 

contributions are first credited against 

the earliest unpaid required 

installments. 

(3) Amount of required installment—

(i) In general. For purposes of this 

section, the amount of any required 

installment is equal to 25% of the 

required annual payment described in 

paragraph (c)(3)(ii) of this section. 

(ii) Required annual payment. The 

required annual payment is equal to the 

lesser of—

(A) 90% of the minimum required 

contribution under section 430 for the 

plan year; or 

(B) 100% of the minimum required 

contribution under section 430 

(determined without regard to any 

funding waiver under section 412) for 

the preceding plan year. 

(iii) Treatment of funding balances. 

For purposes of paragraph (c)(3)(ii) of 

this section, the minimum required 

contribution for a plan year is 

determined without regard to the use of 

the prefunding balance or funding 

standard carryover balance in the 

current year or any prior year. However, 

see paragraph (c)(1)(ii) of this section 

regarding a plan sponsor’s election to 

use the plan’s prefunding balance or 

funding standard carryover balance in 

the current year for the payment of 

quarterly installments. 

(4) Due dates for installments. For 

purposes of this section, there is a 

required installment for each quarter of 

the plan year. The due dates for the four 

required quarterly installments with 

respect to a full plan year are set forth 

in the following table: 

Installment Due date 

First quarter’s installment.15th day of 4th plan 

month. 

Second quarter’s installment.15th day of 7th plan 

month. 

Third quarter’s installment.15th day of 10th plan 

month. 

Fourth quarter’s installment.15th day after the 

close of the plan 

year. 

(5) Special rules for short plan years—

(i) In general. In the case of a short plan 

year, the rules of this paragraph (c) are 

modified as provided in this paragraph 

(c)(5). 

(ii) Current plan year is short plan 

year—(A) Amount of required annual 

payment. In determining the required 

annual payment pursuant to paragraph 

(c)(3)(ii) of this section for a short plan 

year, the amount otherwise determined 

under paragraph (c)(3)(ii)(B) (based on 

the prior year’s minimum required 

contribution) is multiplied by a fraction, 

the numerator of which is the duration 

of the short plan year and the 

denominator of which is 1 year. 

(B) Number and due dates of 

installments. If the plan has a short plan 

year, then an installment is due 15 days 

after the close of that short plan year. In 

addition, an installment is required for 

each due date determined under 

paragraph (c)(4) of this section that falls 

within the short plan year. Thus, for 

example, if the short plan year ends 

before the 15th day of the 4th plan 

month of the plan year, there will be 

only one installment for that short plan 

year, and that installment will be due on 

the 15th day after the close of the short 

plan year. 

(C) Amount of installments. The 

amount of each installment required to 

be paid for the short plan year is equal 

to the required annual payment 

determined pursuant to paragraph 

(c)(3)(ii) of this section (as modified by 

paragraph (c)(5)(ii)(A) of this section) 

divided by the number of installments 

determined pursuant to paragraph 

(c)(5)(ii)(B) of this section. 

(iii) Prior plan year is short plan year. 

If the prior plan year is a short plan 

year, then the rule of paragraph 

(c)(3)(ii)(B) regarding the use of 100% of 

the prior year’s minimum required 

contribution in determining the 

required annual payment does not 

apply. Accordingly, in such a case, the 

required annual payment is equal to 

90% of the minimum required 

contribution under section 430 for the 

current plan year. 

(6) Special rule for plans with 

valuation dates after the first day of the 

plan year. [Reserved] 

(d) Liquidity requirement in 

connection with quarterly 

contributions—(1) In general—(i) 

Requirement to make additional 

quarterly contributions. Except as 

provided in paragraphs (d)(1)(ii) and 

(iii) of this section, if a plan is subject 

to the requirement to make quarterly 

contributions under paragraph (c) of this 

section, then the plan is treated as 

failing to pay the full amount of a 

required installment for a quarter to the 

extent that the value of the liquid assets 

contributed after the close of that 

quarter and on or before the due date for 

the installment is less than the liquidity 

shortfall for that quarter. 

(ii) Limitation on increase. The 

amount by which any required 

installment is increased by reason of 

paragraph (d)(1)(i) of this section cannot 

exceed the amount that, when added to 

prior required installments for the plan 

year, would increase the funding target 

attainment percentage of the plan for the 

plan year (taking into account the 

expected increase in the funding target 

due to benefits accruing or earned 

during the plan year) to 100%. 

(iii) Small plan exception. The 

liquidity requirement of this paragraph 

(d) does not apply to a small plan that 

is described in § 1.430(g)–1(b)(2). 

(2) Period of underpayment—(i) 

General rule. For purposes of applying 

the additional 5 percentage point 

interest adjustment pursuant to 

paragraph (c)(1)(iii) of this section, the 

liquidity increment with respect to a 

quarter as described in paragraph 

(d)(2)(ii) of this section continues to be 

treated as unpaid until the close of the 

quarter in which the due date for that 

installment occurs without regard to 

when that portion is paid. However, for 

purposes of adjusting the contribution 

to the valuation date at the effective 

interest rate under paragraph (b)(3) of 

this section, the adjustment is made 

from the contribution date (rather than 

the close of the quarter). 

(ii) Liquidity increment. For purposes 

of this paragraph (d), the liquidity 

increment with respect to a quarter is 

the portion of the required installment 

for that quarter that is treated as not 

paid solely by reason of paragraph 

(d)(1)(i) of this section. 

(iii) Ordering rule. If the employer 

makes a contribution for a quarter that, 


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Federal Register / Vol. 73, No. 73 / Tuesday, April 15, 2008 / Proposed Rules 20215 

after application of paragraph (c)(2)(ii) 

of this section, is less than the total 

amount needed to satisfy the 

requirements of paragraph (c) of this 

section as increased by this paragraph 

(d) for a quarter, then the contribution 

is first attributed toward satisfying the 

requirements of paragraph (c) of this 

section (without regard to this 

paragraph (d)) and then to the liquidity 

increment. 

(3) Consequences of failure to pay 

liquidity shortfall. See section 4971(f) 

for an excise tax on the failure to pay 

a liquidity shortfall. See also section 

206(e) of ERISA. 

(e) Definitions—(1) In general. The 

definitions set forth in this paragraph (e) 

apply for purposes of this section. 

(2) Adjusted disbursements. The term 

adjusted disbursements means 

disbursements from the plan reduced by 

the product of—

(i) The plan’s funding target 

attainment percentage determined 

under section 430(d)(2) for the plan 

year; and 

(ii) The sum of the purchases of 

annuities and payments of single sums. 

(3) Disbursements from the plan. The 

term disbursements from the plan 

means all disbursements from the trust, 

including purchases of annuities, 

payments of single sums and other 

benefits, and administrative expenses. 

(4) Funding shortfall—(i) In general. 

The term funding shortfall means the 

excess (if any) of—

(A) The funding target of the plan for 

a plan year; over 

(B) The value of plan assets for the 

plan year (as reduced to reflect the 

subtraction of certain funding balances 

as provided under § 1.430(f)–1(c), but 

not below zero). 

(ii) Special rule for plans of 

commercial passenger airlines. In the 

case of a plan year for which an election 

described in section 402(a)(1) of PPA ’06 

is in effect, the term funding shortfall 

means the unfunded liability for that 

plan year determined under § 1.430(a)–

1(b)(4)(ii). 

(iii) Special rule for first effective plan 

year. See paragraph (g)(5)(ii) of this 

section for a calculation of the funding 

shortfall for the plan’s pre-effective plan 

year. 

(iv) Special rule for plan spinoffs and 

mergers. [Reserved] 

(5) Liquid assets—(i) In general. The 

term liquid assets means cash, 

marketable securities, and other assets 

described in this paragraph (e)(5)(i). For 

this purpose, marketable securities 

include financial instruments such as 

stocks and other equity interests, 

evidences of indebtedness (including 

certificates of deposit), options, futures 

contracts, and other derivatives, for 

which there is a liquid financial market, 

and other interests in entities (such as 

partnerships, trusts, or regulated 

investment companies) for which there 

is a liquid financial market. For 

purposes of the preceding sentence, a 

liquid financial market is an established 

financial market described in 

§ 1.1092(d)–1(b) (other than an 

interbank market or an interdealer 

market described in § 1.1092(d)–

1(b)(1)(v) and (vi), respectively). Any 

security that is issued or guaranteed by 

the government of the United States or 

an agency or instrumentality thereof for 

which there is an established financial 

market described in § 1.1092(d)–1(b) is 

a marketable security. Finally, any 

financial instrument or other interest in 

an entity that, under its terms, contains 

a right by which the instrument or other 

interest may immediately be redeemed, 

exchanged, or converted into cash or a 

marketable security, is a marketable 

security, provided there are no 

restrictions on the exercise of that right. 

(ii) Insurance and annuity contracts. 

Other assets that are treated as liquid 

assets of a plan are insurance, annuity, 

or other contracts issued by an 

insurance company that is licensed to 

do business under the laws of any State, 

but only if the insurance, annuity, or 

other contract—

(A) Would be treated as a marketable 

security under paragraph (e)(5)(i) of this 

section if it were a financial instrument; 

(B) Provides for substantially equal 

monthly disbursements to the extent 

provided in paragraph (e)(5)(iii) of this 

section; or 

(C) Is benefit responsive within the 

meaning of paragraph (e)(5)(iv) of this 

section. 

(iii) Insurance and annuity contracts 

providing for substantially equal 

periodic payments. If the contract 

provides for substantially equal monthly 

disbursements (for example, an annuity 

contract in pay status), the only portion 

of the contract that may be treated as 

liquid assets for a quarter is the amount 

equal to 36 times the monthly 

disbursement (in the month containing 

the last day of the quarter) which is 

available under the terms of the 

contract, provided there are no 

restrictions (within the meaning of 

paragraph (e)(5)(v) of this section) on 

the disbursements. 

(iv) Benefit responsive insurance and 

annuity contracts. A contract is 

considered benefit responsive if, under 

applicable law and contractual 

provisions, the plan has the right to 

receive disbursements from the contract 

in order to pay plan benefits for any 

participant in the plan, without 

restrictions (within the meaning of 

paragraph (e)(5)(v) of this section). 

(v) Restrictions. For purposes of 

paragraphs (e)(5)(iii) and (iv) of this 

section, a restriction on a redemption, 

exchange or conversion right, or a 

restriction on a disbursement, may 

result not only from applicable law or 

contractual provisions, but also from 

rehabilitation, conservatorship, 

receivership, insolvency, bankruptcy or 

similar proceedings. 

(6) Liquidity shortfall—(i) In general. 

The term liquidity shortfall means, with 

respect to any required installment, an 

amount equal to the excess (as of the 

last day of the quarter for which that 

installment is made) of—

(A) The base amount with respect to 

the quarter, over 

(B) The value (as of the last day of the 

quarter) of the plan’s liquid assets. 

(ii) Base amount—(A) In general. For 

purposes of this paragraph (e)(6)(ii), the 

term base amount means, with respect 

to any quarter, an amount equal to 3 

times the sum of the adjusted 

disbursements from the plan for the 12 

months ending on the last day of such 

quarter. 

(B) Special rule. If the generally 

applicable base amount for a quarter 

determined under paragraph (e)(6)(ii)(A) 

of this section exceeds an amount equal 

to 2 times the sum of the adjusted 

disbursements from the plan for the 36 

months ending on the last day of the 

quarter and the enrolled actuary for the 

plan certifies to the satisfaction of the 

Commissioner that such excess is the 

result of nonrecurring circumstances, 

the base amount with respect to that 

quarter is determined without regard to 

amounts related to those nonrecurring 

circumstances. 

(7) Plan month—(i) Plan year begins 

on the first day of a calendar month. For 

a plan year that begins with the first day 

of a calendar month, the term plan 

month means any calendar month that 

begins during the plan year. 

(ii) Plan year begins on a date other 

than the first day of a calendar month. 

For a plan year that begins on a date 

other than the first day of a calendar 

month, the first day of each plan month 

is the day of the calendar month that 

corresponds to the day of the calendar 

month that is the first day of the plan 

year. Thus, for example, if the first day 

of a plan year is January 15, then a plan 

month starts on the 15th of each 

calendar month. However, if a calendar 

month does not contain a day that 

corresponds to the day of the calendar 

month which is the first day of the plan 

year (for example, if a calendar month 

has only 30 days and the first day of the 

plan year is the 31st day of a calendar 


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20216 Federal Register / Vol. 73, No. 73 / Tuesday, April 15, 2008 / Proposed Rules 

month), then the first day of the plan 

month that begins during that calendar 

month is the last day of that calendar 

month. 

(8) Quarter. The term quarter means, 

with respect to any required 

installment, the 3-plan-month period 

preceding the plan month in which the 

due date for that installment occurs. 

(9) Short plan year. The term short 

plan year means a plan year that is 

shorter than 12 months (and is not a 52- 

week plan year of a plan that uses a 52–

53 week plan year). 

(f) Examples. The following examples 

illustrate the rules of this section. 

Example 1. (i) Plan A has a calendar year 

plan year and a January 1 valuation date. 

Plan A has a funding standard carryover 

balance of $15,000 as of January 1, 2008, and 

the plan’s funding ratio for 2007 (determined 

using the transition rule in § 1.430(f)–1(h)(5)) 

was over 80%. The minimum required 

contribution for Plan A (prior to any offset for 

the carryover balance) is $100,000 for 2008 

and is $125,000 for 2009. 

The effective interest rate for the 2009 plan 

year is 5.90%. Plan A is subject to the 

quarterly contribution requirements for 2008. 

(ii) The required annual payment for 2009 

is equal to the lesser of (a) 100% of the 2008 

minimum required contribution ($100,000) 

or (b) 90% of the 2009 minimum required 

contribution (90% of $125,000, or $112,500). 

Therefore, each required quarterly 

installment for 2009 is 25% of $100,000, or 

$25,000. 

(iii) Installments of $25,000 each are due 

by April 15, 2009, July 15, 2009, October 15, 

2009, and January 15, 2010. The final 

contribution for the 2009 plan year is due by 

September 15, 2010. The amount of this 

contribution is equal to $125,000, less the 

contributions made prior to that date, with 

all contributions adjusted to the valuation 

date using the effective interest rate for the 

2009 plan year. If the plan sponsor makes 

each required quarterly installment on the 

date due, the remaining amount due is 

determined as follows: 

(A) The contribution paid April 15, 2009, 

is adjusted by discounting the contribution 

amount for 3 1⁄2 months at the effective 

interest rate ($25,000 ÷ 1.0590 (3.5/12) = 

$24,585). 

(B) The contribution paid July 15, 2009, is 

discounted for 61⁄2 months at the effective 

interest rate ($25,000 ÷ 1.0590 (6.5/12) = 

$24,236). 

(C) The contribution paid October 15, 

2009, is discounted for 91⁄2 months at the 

effective interest rate ($25,000 ÷ 1.0590 (9.5/12)

= $23,891). 

(D) The contribution paid January 15, 2010, 

is discounted for 121⁄2 months at the effective 

interest rate ($25,000 ÷ 1.0590 (12.5/12) = 

$23,551). 

(E) The sum of the above contributions for 

the 2009 plan year paid through January 15, 

2010, adjusted for interest to the valuation 

date, is $96,263. The remaining amount due 

for the 2009 plan year is $125,000 minus 

$96,263, or $28,737, as of January 1, 2009. 

(iv) If the final contribution is made on 

September 15, 2010, the remaining amount 

due must be increased for interest at the 

plan’s effective interest rate for the 201⁄2

months between January 1, 2009, and 

September 15, 2010 (so that when it is 

discounted with interest for those 201⁄2

months the resulting amount will equal 

$28,737). Therefore, the remaining 

contribution made on September 15, 2010, is 

$28,737 × 1.0590 (20.5/12) = $31,694. 

Example 2. (i) The facts are the same as in 

Example 1, except that the plan sponsor 

elects to use the $15,000 carryover balance as 

of January 1, 2008, to offset the minimum 

required contribution for the 2008 plan year. 

The plan sponsor makes a contribution on 

January 1, 2008, of $85,000, which satisfies 

the minimum contribution requirement for 

2008. 

(ii) The required quarterly installment for 

2009 is unaffected by the plan sponsor’s 

election to offset the minimum required 

contribution by the carryover balance for 

2008. Therefore, the required annual 

payment is $100,000 (determined as the 

lesser of (a) 100% of $100,000 or (b) 90% of 

$125,000) and the amount of each required 

quarterly installment for 2009 is 25% of the 

required annual payment, or $25,000. 

Example 3. (i) The facts are the same as in 

Example 1. Plan A’s funding standard 

carryover balance has increased to $17,000 as 

of January 1, 2009, based on the actual rate 

of return of plan assets for the 2008 plan 

year. Plan A’s funding ratio for 2008 

(determined under § 1.430(f)–1(d)(3)) is over 

80%. On April 13, 2009, the plan sponsor 

elects to use the entire amount of the 

carryover balance to offset the minimum 

required contribution for 2009. 

(ii) The plan sponsor’s election to use the 

carryover balance to offset the minimum 

required contribution is treated as satisfying 

the requirement to make a required 

installment to the extent of the amount 

elected, adjusted with interest. This 

adjustment is made at the plan’s effective 

interest rate for the 2009 plan year, and 

applies for the period between January 1, 

2009, and April 15, 2009. Therefore, the 

$17,000 carryover balance as of January 1, 

2009, offsets $17,000 × 1.0590 (3.5/12) or 

$17,287 of the $25,000 quarterly contribution 

installment due April 15, 2009, and the 

remaining contribution due on April 15, 

2009, is $25,000 minus $17,287, or $7,713. 

(iii) The interest adjustments in paragraph 

(ii) of this Example 3 are based on the 

effective interest rate even if that rate is not 

determined by the time that the quarterly 

contribution is due. If the plan’s effective 

interest rate for the plan year has not been 

determined at the time that the quarterly 

contribution is due, the actual amount of the 

required installment satisfied by the use of 

the carryover balance is determined after the 

effective interest rate is determined. If the 

extent to which the carryover balance 

satisfies the installment requirement is 

overestimated and the result is the full 

amount of the required quarterly installment 

is not paid by the due date, the plan is 

subject to the consequences for late or unpaid 

quarterly contributions as described in 

paragraph (c)(1)(iii) of this section. 

Example 4. (i) The facts are the same as in 

Example 3. The plan sponsor makes a 

contribution of $7,713 (which is equal to the 

remaining portion of the first required 

quarterly installment) on April 15, 2009. For 

the 2009 plan year, the plan sponsor makes 

another contribution of $200,000 on June 30, 

2009. No further contributions are made for 

the 2009 plan year. 

(ii) The contributions made for the 2009 

plan year are adjusted to the valuation date 

using the plan’s effective interest rate for the 

2009 plan year. The contribution paid April 

15, 2009, is discounted for the 31⁄2 months 

between January 1, 2009, and the date of 

payment, using the effective interest rate of 

5.90% ($7,713/1.0590 (3.5/12) = $7,585). The 

contribution paid June 30, 2009, is 

discounted for 6 months using the effective 

interest rate ($200,000/1.0590 (6/12) = 

$194,349), for a total interest-adjusted 

contribution of $201,934. 

(iii) The minimum required contribution 

for 2009 (prior to any offset for the carryover 

balance) is $125,000 and, under § 1.430(f)–

1(b)(1)(ii)(B), this amount is used to 

determine the interest-adjusted excess 

contribution. Accordingly, the interestadjusted excess contribution for 2009 is 

$201,934 minus $125,000, or $76,934, 

increased for interest to January 1, 2010, 

using the effective interest rate for 2009 of 

5.90%. Thus, the interest-adjusted excess 

contribution as of January 1, 2010, is $76,934 

multiplied by 1.059, or $81,473. All or a 

portion of this amount may be credited to the 

prefunding balance at the election of the plan 

sponsor. 

Example 5. (i) The facts are the same as in 

Example 3. The plan sponsor pays the 

required quarterly installment of $7,713 on 

April 15, 2009, and installments of $25,000 

each on July 15, 2009, and October 15, 2009. 

However, only $10,000 of the installment due 

on January 15, 2010, is paid. No additional 

contributions are made until the final 

contribution for the plan year of $55,000 is 

paid on September 15, 2010. 

(ii) The 2009 Schedule SB shows that the 

contributions for the plan year exceed the 

minimum required contribution. This is 

determined by comparing the minimum 

required contribution of $108,000 ($125,000 

offset by $17,000 for the amount of carryover 

balance used) and the interest-adjusted 

contributions made for the 2009 plan year, 

developed as shown below: 

(A) The contribution paid April 15, 2009, 

is adjusted by discounting the contribution 

amount for 31⁄2 months at the effective 

interest rate ($7,713 ÷ 1.0590 (3.5/12) = $7,585). 

(B) The contribution paid July 15, 2009, is 

discounted for 61⁄2 months at the effective 

interest rate ($25,000 ÷ 1.0590 (6.5/12) = 

$24,236). 

(C) The contribution paid October 15, 

2009, is discounted for 91⁄2 months at the 

effective interest rate ($25,000 ÷ 1.0590 (9.5/12)

= $23,891). 

(D) The contribution paid January 15, 2010, 

is discounted for 121⁄2 months at the effective 

interest rate ($10,000 ÷ 1.0590 (12.5/12) = 

$9,420). 

(E) Pursuant to paragraph (c)(1)(iii)(A) of 

this section, the adjustment for interest on 

the $15,000 underpayment of the quarterly 

installment due January 15, 2010, is 

increased by 5 percentage points for the 8- 


rfrederick on PROD1PC67 with PROPOSALS
Federal Register / Vol. 73, No. 73 / Tuesday, April 15, 2008 / Proposed Rules 20217 

month period of underpayment (January 15, 

2010, through September 15, 2010). 

Accordingly, $15,000 of the contribution 

paid on September 15, 2010, is discounted 

using a rate of 10.90% for 8 months and at 

the 5.90% effective interest rate for the 

remaining 121⁄2 months between the 

quarterly contribution due date of January 15, 

2010, and the valuation date of January 1, 

2009. This portion of the September 15, 2010, 

contribution results in an adjusted amount of 

$13,189 as of January 1, 2009 ($15,000 ÷ 

1.1090 (8/12) ÷ 1.0590 (12.5/12)

). 

(F) The remaining $40,000 of the 

contribution paid on September 15, 2010, is 

discounted using the effective interest rate of 

5.90% for the 201⁄2-month period between 

the date of payment and the valuation date. 

This portion of the payment is therefore 

adjusted to $36,268 as of the valuation date 

(that is, $40,000 ÷ 1.0590 (20.5/12)

). 

(G) The sum of the above contributions for 

the 2009 plan year paid through January 15, 

2010, adjusted for interest to the valuation 

date, is $114,589. This is greater than the 

minimum required contribution for the 2009 

plan year of $108,000. 

Example 6. (i) The facts are the same as in 

Example 5, except that the plan sponsor does 

not make a contribution on September 15, 

2010. Another contribution is not made until 

December 15, 2010. 

(ii) The 2009 Schedule SB shows an 

unpaid minimum required contribution of 

$42,868 as of January 1, 2009. This is equal 

to the difference between the minimum 

required contribution of $108,000 ($125,000 

offset by $17,000 for the amount of carryover 

balance used) and $65,132 (the interestadjusted contributions made for the 2009 

plan year before the 81⁄2 month deadline, as 

illustrated in paragraphs (ii)(A) through 

(ii)(D) of Example 5). 

Example 7. (i) The facts are the same as in 

Example 1, except that the plan year is 

changed to an August 1–July 31 plan year 

effective August 1, 2009. This results in a 

short plan year beginning January 1, 2009, 

and ending July 31, 2009. The minimum 

required contribution for the 7-month period 

covered by the plan year is calculated as 

$72,917 in accordance with § 1.430(a)–

1(b)(2)(ii). 

(ii) As provided in paragraph (c)(5) of this 

section, a required installment is due 15 days 

after the close of the short plan year (August 

15, 2009), and required installments are also 

due on the regularly scheduled due dates for 

quarterly installments that occur within the 

short plan year (April 15, 2009, and July 15, 

2009). 

(iii) The required installments are 

determined based on the lesser of (a) 90% of 

the minimum required contribution for the 

short plan year ending July 31, 2009 (90% of 

$72,917, or $65,625) or (b) 7/12 of 100% of 

the 2008 minimum required contribution 

($100,000 × 7/12, or $58,333). The required 

installments are thus based on $58,333 since 

that is the smaller amount. 

(iv) The amount of each required 

installment is determined by dividing the 

amount determined in paragraph (iii) of this 

Example 7 by the number of required 

installments for the short plan year. This 

calculation results in required installments of 

$19,444 each (that is, $58,333 divided by 3 

installments). 

(v) The deadline for the remaining 

payment is 81⁄2 months after the end of the 

short plan year, or April 15, 2010. If the plan 

sponsor pays the minimum required amount 

at each installment date, does not elect to 

offset any amounts by any carryover or 

prefunding balance, and makes a final 

payment on April 15, 2010, then the 

remaining payment is $17,429, determined as 

follows: 

(A) The contribution paid April 15, 2009, 

is adjusted by discounting the contribution 

amount for 31⁄2 months at the effective 

interest rate ($19,444 ÷ 1.0590 (3.5/12) = 

$19,122). 

(B) The contribution paid July 15, 2009, is 

discounted for 61⁄2 months at the effective 

interest rate ($19,444 ÷ 1.0590 (6.5/12) = 

$18,850). 

(C) The contribution paid August 15, 2009, 

is discounted for 71⁄2 months at the effective 

interest rate ($19,444 ÷ 1.0590 (7.5/12) = 

$18,760). 

(D) The sum of the above contributions for 

the 2009 plan year paid through August 15, 

2009, adjusted for interest to the valuation 

date, is $56,732. The remaining amount paid 

April 15, 2010, for the 2009 plan year is 

($72,917 ¥ $56,732) × 1.059 (15.5/12) = 

$17,429. 

Example 8. (i) Plan B has an August 10 to 

August 9 plan year. Quarterly installments 

are required for the plan year that begins 

August 10, 2009. 

(ii) For the plan year that begins on August 

10, 2009, a plan month begins on the 10th 

day of each calendar month. Accordingly, the 

due dates for the required installments for 

that plan year are November 24, 2009, 

February 24, 2010, May 24, 2010, and August 

24, 2010. The deadline for the final 

contribution for the plan year is April 24, 

2011. 

Example 9. (i) Plan C has a calendar-year 

plan year and is not a small plan described 

in section 430(g)(2)(B). Plan C is subject to 

the requirement to pay quarterly 

contributions under paragraph (c) of this 

section for the 2009 plan year. The valuation 

date for Plan C is January 1, and Plan C’s 

funding target attainment percentage 

(‘‘FTAP’’) is 85% as of January 1, 2009. 

Before taking the liquidity requirement of 

paragraph (d) of this section into account, 

quarterly contributions are required for the 

2009 plan year in the amount of $50,000 

each. During the 12-month period ending 

March 31, 2009, periodic annuity payments 

of $350,000 and lump sum payments of 

$200,000 were made by Plan C. None of these 

payments were due to nonrecurring 

circumstances. In addition, administrative 

expenses of $100,000 were paid from the 

plan trust. The market value of Plan C’s 

assets is $1,500,000 as of March 31, 2008, of 

which $1,300,000 is in liquid assets. The 

amount needed to increase the plan’s FTAP 

(including the expected increase in the 

funding target due to benefits accruing or 

earned during the plan year) to 100% is 

$500,000. 

(ii) The amount of the adjusted 

disbursements from Plan C for the 12-month 

period ending March 31, 2009, is calculated 

as the sum of the annuity benefits, lump sum 

payments, and administrative expenses paid 

during the 12-month period, reduced by the 

product of the lump sum payments and the 

plan’s FTAP. This results in adjusted 

disbursements for the period of $480,000 

(that is, $350,000 plus $200,000 plus 

$100,000, reduced by 85% of $200,000 in 

lump sum payments). 

(iii) The base amount is calculated in 

accordance with paragraph (e)(6)(ii) of this 

section as three times the adjusted 

disbursements determined in paragraph (ii) 

of this Example 9, or $1,440,000. 

(iv) The liquidity shortfall is the difference 

between the base amount of $1,440,000 

determined in paragraph (iii) of this Example 

9 and the $1,300,000 in liquid assets as of 

March 31, 2008, or $140,000. The quarterly 

contribution due on April 15, 2009, is 

therefore $140,000, since this amount is 

larger than the $50,000 quarterly contribution 

requirement otherwise applicable but less 

than the $500,000 needed to increase the 

plan’s FTAP (including the expected increase 

in the funding target due to benefits accruing 

or earned during the plan year) to 100%. The 

liquidity increment is $90,000. 

(v) Note that any contributions made 

through March 31, 2009, are included in Plan 

C’s assets as of March 31, 2009, and would 

therefore not be applied toward satisfying the 

liquidity shortfall contribution requirement 

due April 15, 2009. Similarly, any funding 

standard carryover balance or prefunding 

balance as of January 1, 2009, cannot be 

applied to offset the liquidity shortfall 

contribution requirement. Only contributions 

made in cash or other liquid assets made 

after March 31, 2009, and by April 15, 2009, 

can be used to timely satisfy this 

requirement. 

Example 10. (i) The facts are the same as 

in Example 9. The plan sponsor makes a 

contribution of $30,000 on April 15, 2009, 

and makes an additional contribution of 

$110,000 on April 30, 2009. The effective 

interest rate for Plan C for the 2009 plan year 

is 5.90%. 

(ii) The contribution paid on April 15, 

2009, is applied first to the portion of the 

quarterly contribution that is required under 

paragraph (c) of this section (that is, the 

portion not attributable to the liquidity 

shortfall contribution). This results in an 

underpayment of this portion of the quarterly 

contribution due April 15, 2009, of $20,000 

(that is, $50,000 minus $30,000). In 

accordance with paragraph (c)(1)(iii)(A) of 

this section, the interest rate used to adjust 

this portion of the late quarterly contribution 

is increased by 5 percentage points for the 1⁄2

month period of underpayment. Accordingly, 

$20,000 of the April 15, 2009, contribution is 

adjusted to the January 1, 2009, valuation 

date using an interest rate of 10.90% for the 

1⁄2 month between the April 15, 2009, due 

date and the April 30, 2009, payment date, 

and by 5.90% for the 31⁄2 month period 

between January 1, 2009, and the April 15, 

2009, due date. This portion results in an 

interest-adjusted contribution of $19,584 as 

of January 1, 2009 ($20,000 ÷ 1.1090 (0.5/12) ÷ 

1.059 (3.5/12)). 

(iii) Under paragraph (d)(2) of this section, 

the interest rate used to adjust the portion of 


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the underpayment attributable to the 

liquidity shortfall contribution is increased 

by 5 percentage points, and the contribution 

is treated as unpaid until the close of the 

quarter in which the due date occurs. 

Therefore, even though the full amount of the 

liquidity shortfall was paid by April 30, 

2009, the increase in the interest rate is 

applied as if the late liquidity shortfall 

contribution was not made until June 30, 

2009, 21⁄2 months after the contribution was 

due. 

(iv) However, in accordance with 

paragraph (d)(2) of this section, each 

payment is discounted for interest based on 

the date of the actual payment, despite the 

fact that the 5-percentage-point increase in 

the interest rate is calculated as if the 

payment was not made until the end of the 

quarter. Therefore, the portion of the 

underpayment due to the liquidity increment 

($140,000 minus the $50,000 quarterly 

contribution requirement otherwise required, 

or $90,000) is adjusted for interest for the 4- 

month period between the January 1, 2009, 

valuation date and the April 30, 2009, date 

of payment. An interest rate of 10.90% is 

used for 21⁄2 months (corresponding to the 

period between the April 15, 2009, due date 

and June 30, 2009, the end of the quarter in 

which the payment was due), and Plan C’s 

effective interest rate for the 2009 plan year 

(5.90%) is used for the remaining 11⁄2

months. Therefore, the portion of the April 

30, 2009, contribution attributable to the 

liquidity increment is adjusted to $87,452 as 

of January 1, 2009 ($90,000 ÷ 1.1090 (2.5/12) ÷ 

1.0590 (1.5/12)). 

Example 11. (i) The facts are the same as 

in Example 10, except that the plan sponsor 

does not make the second contribution of 

$110,000 until July 15, 2009. 

(ii) The July 15, 2009, contribution is 

adjusted for interest for a total of 61⁄2 months 

for the period between January 1, 2009, and 

the payment date of July 15, 2009. In 

accordance with paragraph (d)(2) of this 

section, the 5-percentage-point increase in 

the interest rate used to adjust the portion of 

the contribution attributable to the unpaid 

liquidity shortfall contribution is applied as 

if the contribution was made at the end of the 

quarter in which the payment was due. 

Therefore, the interest adjustment for the 

$90,000 attributable to the late liquidity 

shortfall contribution uses an interest rate of 

10.90% for the 21⁄2-month period 

corresponding to the period between the 

April 15, 2009, due date and June 30, 2009, 

the end of the quarter in which the payment 

was due, and the effective interest rate of 

5.90% for the remaining 4 months. 

(iii) The liquidity shortfall is recalculated 

as of June 30, 2009, and the larger of the 

resulting amount or the $50,000 quarterly 

contribution otherwise applicable is due on 

July 15, 2009. This amount is required to be 

paid in addition to the unpaid liquidity 

shortfall contribution due April 15, 2009. 

Note that the amount of liquid assets as of 

June 30, 2009 is smaller than it would have 

been had the April 15, 2009, liquidity 

shortfall payment been made. Therefore, the 

fact that the April 15, 2009, liquidity shortfall 

payment was not made before June 30, 2009, 

means that the plan sponsor is required to 

contribute more than the amount needed to 

increase the liquid assets to the base amount 

as of June 30, 2009. However, in accordance 

with paragraph (d)(1)(ii) of this section, the 

total amount of the required installments 

(including those due but not paid) is limited 

so that it is no larger than the amount that 

would increase the plan’s FTAP (taking into 

account the expected increase in the funding 

target due to benefits accruing or earned 

during the plan year) to 100%. 

Example 12. (i) Plan D, which is a small 

plan described in section 430(g)(2)(B), has a 

calendar year plan year and a valuation date 

of December 31. The quarterly required 

installments for the 2009 plan year are 

$30,000 each and each of the required 

installments is paid on the due date. The 

effective interest rate for Plan D for the 2009 

plan year is 5.90%. 

(ii) The total contributions made for the 

plan year and before the valuation date, 

adjusted with interest to the valuation date, 

equal $92,402. This is developed as shown 

below: 

(A) The contribution paid April 15, 2009, 

is adjusted by increasing the contribution 

amount for 81⁄2 months at the effective 

interest rate ($30,000 × 1.0590 (8.5/12) = 

$31,243). 

(B) The contribution paid July 15, 2009, is 

increased for 51⁄2 months at the effective 

interest rate ($30,000 × 1.0590 (5.5/12) = 

$30,799). 

(C) The contribution paid October 15, 

2009, is increased for 21⁄2 months at the 

effective interest rate ($30,000 × 1.0590 (2.5/12)

= $30,360). 

(iii) Pursuant to § 1.430(g)–1(d)(2), the 

interest-adjusted value of the contributions 

for the 2009 plan year that are made before 

the valuation date is subtracted from the 

December 31, 2009, plan assets in 

determining the value of plan assets for the 

December 31, 2009 actuarial valuation. 

(g) Effective/applicability dates and 

transition rules—(1) In general. Section 

430 generally applies to plan years 

beginning on or after January 1, 2008. In 

general, this section applies to plan 

years beginning on or after January 1, 

2009. However, plans are permitted to 

apply this section in applying the rules 

of section 430(j) for plan years 

beginning in 2008. 

(2) Plans with delayed effective date. 

In the case of a plan for which the 

effective date of section 430 is delayed 

in accordance with sections 104 through 

106 of PPA ’06, this section applies to 

plan years beginning on or after the first 

day of the first effective plan year. 

(3) First effective plan year. For 

purposes of this section, the first 

effective plan year for a plan is the first 

plan year for which section 430 applies 

to the plan. 

(4) Pre-effective plan year. For 

purposes of this section, the preeffective plan year for a plan is the last 

plan year before the first effective plan 

year. Thus, except for plans with a 

delayed effective date under paragraph 

(g)(2) of this section, the pre-effective 

plan year for a plan is the last plan year 

beginning before January 1, 2008. 

(5) Special rules relating to first 

effective plan year—(i) Determination of 

minimum required contribution for preeffective plan year. In the case of the 

plan’s first effective plan year, the 

minimum required contribution for the 

preceding plan year for purposes of 

paragraph (c)(3)(ii)(B) of this section is 

equal to the minimum required 

contribution under section 412 for the 

pre-effective plan year (determined 

without regard to any funding waiver 

under section 412), which is determined 

as of the last day of the pre-effective 

plan year and is determined without 

regard to the use of the plan’s credit 

balance. 

(ii) Determination of funding shortfall 

for pre-effective plan year. [Reserved] 

PART 54—PENSION EXCISE TAXES 

Par. 4. The authority citation for part 

54 continues to read in part as follows: 

Authority: 26 U.S.C. 7805 * * * 

Par. 5. Section 54.4971(c)–1 is added 

to read as follows: 

§ 54.4971(c)–1 Taxes on failure to meet 

minimum funding standards; definitions 

(a) In general. This section sets forth 

definitions that apply for purposes of 

applying the rules of section 4971. 

(b) Accumulated funding deficiency. 

With respect to a multiemployer plan, 

the term accumulated funding 

deficiency has the meaning given to that 

term by section 431. A plan’s 

accumulated funding deficiency for a 

plan year takes into account all charges 

and credits to the funding standard 

account under section 412 for plan years 

before the first plan year for which 

section 431 applies to the plan. 

(c) Unpaid minimum required 

contribution—(1) In general. The term 

unpaid minimum required contribution 

means, with respect to any plan year, 

any minimum required contribution 

under section 430 for the plan year that 

is not paid on or before the due date for 

the plan year under section 430(j)(1). 

(2) Accumulated funding deficiency 

for pre-effective plan year. For purposes 

of this section, a plan’s accumulated 

funding deficiency under section 412 

for the pre-effective plan year is treated 

as an unpaid minimum required 

contribution for that plan year until 

correction is made under the rules of 

paragraph (d)(2) of this section. 

(d) Correct—(1) Accumulated funding 

deficiency. The term correct means, 

with respect to an accumulated funding 

deficiency for a plan year, the 

contribution, to or under the plan, of the 


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amount necessary to reduce the 

accumulated funding deficiency as of 

the end of that plan year to zero. To 

reduce the deficiency to zero, the 

contribution must include interest at the 

plan’s valuation interest rate for the 

period between the end of that plan year 

and the date of the contribution. 

(2) Unpaid minimum required 

contribution—(i) Interest adjustments—

(A) General rule. The term correct 

means, with respect to an unpaid 

minimum required contribution for a 

plan year, the contribution, to or under 

the plan, of an amount that, when 

discounted to the valuation date for the 

plan year for which the unpaid 

minimum required contribution is due 

at the appropriate rate of interest, equals 

or exceeds the unpaid minimum 

required contribution. For this purpose, 

the appropriate rate of interest is the 

plan’s effective interest rate for the plan 

year for which the unpaid minimum 

required contribution is due except to 

the extent that the payments are subject 

to additional interest as provided under 

section 430(j) (3) or (4). 

(B) Pre-PPA accumulated funding 

deficiency. The term correct means, 

with respect to the accumulated funding 

deficiency under section 412 for the preeffective plan year that is described in 

paragraph (c)(2) of this section, the 

contribution, to or under the plan, of the 

amount of that accumulated funding 

deficiency increased with interest from 

the end of the pre-effective plan year to 

the date of the contribution at the plan’s 

valuation interest rate for the preeffective plan year. 

(ii) Ordering rule. For purposes of 

section 4971 and this section, a 

contribution is attributable first to the 

earliest plan year of any unpaid 

minimum required contribution for 

which correction has not yet been made. 

(3) Corrective action of certain 

retroactive plan amendments. Certain 

retroactive plan amendments that meet 

the requirements of section 412(d)(2) 

may reduce the minimum required 

contribution for a plan year, which 

would reduce the accumulated funding 

deficiency or the amount of the unpaid 

minimum required contribution for a 

plan year. 

(e) Taxable period. The term taxable 

period has the same meaning given that 

term under § 54.4971–1(e). 

(f) Examples. The following examples 

illustrate the rules of this section. 

Example 2. (i) Example 1. Plan A, a single 

employer defined benefit plan, has a calendar 

year plan year and a January 1 valuation date. 

The sponsor of Plan A has a calendar taxable 

year. Plan A has no funding shortfall as of 

the end of 2008, and Plan A has no unpaid 

minimum required contributions for 2008 or 

any earlier plan year. The minimum required 

contribution for the 2009 plan year is 

$250,000. The plan sponsor makes one 

contribution for 2009 on July 1, 2009, in the 

amount of $200,000, and the sponsor does 

not make an election to use the prefunding 

balance or funding standard carryover 

balance to offset the minimum required 

contribution for 2009. The effective interest 

rate for Plan A for the 2009 plan year is 

5.90%. 

(ii) The interest-adjusted contribution for 

2009 is $200,000 divided by 1.0590 (6/12)

, or 

$194,349, as of January 1, 2009. The unpaid 

minimum required contribution for the 2009 

plan year is $250,000 minus $194,349, or 

$55,651. The excise tax due under section 

4971(a) is 10% of the unpaid minimum 

required contribution, or $5,565. 

(i) The facts are the same as in 

Example 1. The plan sponsor makes a 

contribution of $175,000 on December 

31, 2010. 

(ii) Under the ordering rule in 

paragraph (d)(2)(ii) of this section, the 

contribution made on December 31, 

2010, is applied first to correct the 

unpaid minimum required contribution 

for 2009. The portion of the contribution 

paid December 31, 2010, that is required 

to eliminate the unpaid minimum 

required contribution for 2009 (taking 

into account the 2009 effective interest 

rate for the 24 months between January 

1, 2009, and the payment date of 

December 31, 2010), is $55,651 

multiplied by 1.059 (24/12) or $62,412. 

The remaining payment of $112,588 

($175,000 minus $62,412) is applied to 

the contribution required for the 2010 

plan year. 

Example 3. (i) Plan B, a single employer 

defined benefit plan, has a calendar plan 

year. The sponsor of Plan B has a calendar 

taxable year. Plan B has an accumulated 

funding deficiency of $100,000 as of 

December 31, 2007, including additional 

interest due to late quarterly contributions 

during 2007. The valuation interest rate for 

the 2007 plan year is 7.5%. 

(ii) In accordance with paragraph 

(c)(2) of this section, the accumulated 

funding deficiency under section 412 as 

of December 31, 2007, is considered an 

unpaid minimum required contribution 

until it is corrected. Pursuant to 

paragraph (d)(2)(i)(B) of this section, the 

amount needed to correct that 

accumulated funding deficiency is 

$100,000 plus interest at the valuation 

interest rate of 7.5% for the period 

between December 31, 2007, and the 

date of payment of the contribution. 

(iii) The funding shortfall as of 

January 1, 2008, is calculated as the 

difference between the funding target 

and the value of assets as of that date. 

The assets are not adjusted by the 

amount of the accumulated funding 

deficiency; the fact that the contribution 

was not made for the 2007 plan year 

means that the January 1, 2008, funding 

shortfall is larger than it would have 

been otherwise. 

Example 4. (i) The facts are the same as in 

Example 3. The minimum required 

contribution for the 2008 plan year is 

$125,000, but the plan sponsor does not 

make any required contributions for 2008. 

(ii) The total unpaid minimum required 

contribution as of December 31, 2008, is the 

sum of the $100,000 accumulated funding 

deficiency under section 412 from 2007 and 

the $125,000 unpaid minimum required 

contribution for 2008, or $225,000. The 

section 4971(a) excise tax applies to the 

aggregate unpaid minimum required 

contributions for all plan years that remain 

unpaid as of the end of 2008. In this case, 

there is an unpaid minimum required 

contribution of $100,000 for the 2007 plan 

year and an unpaid minimum required 

contribution of $125,000 for the 2008 plan 

year. The section 4971(a) excise tax is 10% 

of the aggregate of those unpaid amounts, or 

$22,500. 

Example 5. (i) The facts are the same as in 

Example 4, except that the plan sponsor 

makes a contribution of $150,000 on 

December 31, 2008. No additional 

contributions are paid through September 15, 

2009. Quarterly contributions of $25,000 

each are due April 15, 2008, July 15, 2008, 

October 15, 2008, and January 15, 2009. Plan 

B’s effective interest rate for the 2008 plan 

year is 5.75%. 

(ii) In accordance with paragraph (c)(2) of 

this section, the accumulated funding 

deficiency under section 412 as of December 

31, 2007, is treated as an unpaid minimum 

required contribution until it is corrected. 

(iii) The December 31, 2008, contribution 

is first applied to the 2007 accumulated 

funding deficiency under section 412 that is 

treated as an unpaid minimum required 

contribution. Accordingly, the amount 

needed to correct the 2007 unpaid required 

minimum contribution ($100,000 multiplied 

by 1.075, or $107,500) is applied to eliminate 

this unpaid minimum required contribution 

for the 2007 plan year. 

(iv) The remaining December 31, 2008, 

contribution ($150,000 minus $107,500, or 

$42,500) is then applied to the 2008 

minimum required contribution. This 

amount is first allocated to the quarterly 

contribution due April 15, 2008. In 

accordance with § 1.430(j)–1(c)(1)(iii)(A), the 

adjustment for interest on late quarterly 

contributions is increased by 5 percentage 

points for the period of underpayment. 

Therefore, $25,000 of the remaining 

December 31, 2008, contribution is 

discounted using an interest rate of 10.75% 

for the 81⁄2-month period between the 

payment date of December 31, 2008 and the 

quarterly contribution due date of April 15, 

2008, and at the 5.75% effective interest rate 

for the 31⁄2 months between April 15, 2008, 

and January 1, 2008. This portion of the 

December 31, 2008, contribution results in an 

adjusted amount of $22,880 (that is, $25,000 

÷ 1.1075(8.5/12) ÷ 1.0575(3.5/12)) as of January 1, 

2008. 

(v) The remaining December 31, 2008, 

contribution is then applied to the quarterly 

contribution due July 15, 2008. The balance 


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of the December 31, 2008, contribution 

($150,000 minus $107,500 minus $25,000, or 

$17,500) is paid after the due date for the 

second required quarterly installment. 

Accordingly, the remaining $17,500 

contribution is adjusted using an interest rate 

of 10.75% for the 51⁄2-month period between 

the payment date of December 31, 2008 and 

the quarterly contribution due date of July 

15, 2008, and at the 5.75% effective interest 

rate for the 61⁄2 months between July 15, 

2008, and January 1, 2008. This portion of 

the December 31, 2008, contribution results 

in an adjusted amount of $16,202 (that is, 

$17,500 ÷ 1.1075(5.5/12) ÷ 1.0575(6.5/12)

) as of 

January 1, 2008. 

(vi) The remaining unpaid minimum 

required contribution for 2008 is $125,000 

minus the interest-adjusted amounts of 

$22,880 and $16,202 applied towards the 

2008 minimum required contribution as 

determined in paragraphs (iv) and (v) of this 

Example 5. This results in an unpaid 

minimum required contribution of $85,918 

for 2008. The section 4971(a) excise tax is 

10% of the unpaid minimum required 

contribution, or $8,592. 

Example 6. (i) Plan C, a single employer 

defined benefit plan, has a calendar year plan 

year and a January 1 valuation date, and has 

no funding standard carryover balance or 

prefunding balance as of January 1, 2008. 

Plan C’s sponsor has a calendar year taxable 

year. The minimum required contributions 

for Plan C are $100,000 for the 2008 plan 

year, $110,000 for the 2009 plan year, 

$125,000 for the 2010 plan year, and 

$135,000 for the 2011 plan year. No 

contributions for these plan years are made 

until September 15, 2012, at which time the 

plan sponsor contributes $273,000 (which is 

exactly enough to correct the unpaid 

minimum required contributions for the 2008 

and 2009 plan years). 

(ii) The excise tax under section 4971(a) is 

10% of the aggregate unpaid minimum 

required contributions for all plan years 

remaining unpaid as of the end of any plan 

year ending within the 2008 taxable year. 

Accordingly, the excise tax for the 2008 

taxable year is $10,000 (that is, 10% of 

$100,000). The excise tax for the 2009 taxable 

year is $21,000 (that is, 10% of the sum of 

$100,000 and $110,000) and the excise tax for 

the 2010 taxable year is $33,500 (that is, 10% 

of the sum of $100,000, $110,000, and 

$125,000). 

(iii) The contribution made on September 

15, 2012, is applied to correct the unpaid 

minimum required contributions for the 2008 

and 2009 plan years by the deadline for 

making contributions for the 2011 plan year. 

Therefore, the excise tax under section 

4971(a) for the 2011 taxable year is based 

only on the remaining unpaid minimum 

required contributions for the 2010 and 2011 

plan years, or $26,000 (that is, 10% of the 

sum of $125,000 and $135,000). 

(iv) The plan sponsor may also be required 

to pay an excise tax of 100% under section 

4971(b), if the unpaid minimum required 

contributions are not corrected by the end of 

the taxable period. 

(g) Effective/applicability dates and 

transition rules—(1) Statutory effective 

date—(i) In general. In general, the 

amendments made to section 4971 by 

section 114 of the Pension Protection 

Act of 2006, Public Law 109–280, 120 

Stat. 780 (PPA ‘06), apply to taxable 

years beginning on or after January 1, 

2008, but only with respect to plan 

years that end with or within any such 

taxable year. 

(ii) Plans with delayed PPA ’06 

effective dates. In the case of a plan for 

which the effective date of section 430 

is delayed in accordance with sections 

104 through 106 of PPA ’06, the 

amendments made to section 4971 by 

section 114 of PPA ’06 apply to taxable 

years beginning on or after January 1, 

2008, but only with respect to plan 

years beginning on or after the date 

section 430 first applies with respect to 

the plan. 

(2) Effective date of regulations. This 

section is effective for taxable years 

beginning on and after the statutory 

effective date described in paragraph 

(g)(1) of this section, but in no event 

does this section apply to taxable years 

ending before April 15, 2008. 

(3) Pre-effective plan year. For 

purposes of this section, the preeffective plan year for a plan is the last 

plan year beginning before section 430 

applies to the plan. Thus, except for 

plans with a delayed effective date 

under paragraph (g)(1)(ii) of this section, 

the pre-effective plan year for a plan is 

the last plan year beginning before 

January 1, 2008. 

Linda E. Stiff, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 08–1133 Filed 4–11–08; 10:10 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[Docket No. USCG–2008–0180] 

RIN 1625–AA00 

Safety Zone; Patapsco River, 

Northwest and Inner Harbors, 

Baltimore, MD 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Coast Guard proposes to 

establish a temporary safety zone upon 

certain waters of the Patapsco River, 

Northwest Harbor and Inner Harbor 

during the movements of the historic 

sloop-of-war USS CONSTELLATION. 

This action is necessary to provide for 

the safety of life on navigable waters 

during two tows of the vessel in 

Baltimore, Maryland; one from its berth 

at Baltimore’s Inner Harbor to a berth at 

the South Locust Point Marine 

Terminal, and the other from the South 

Locust Point Marine Terminal to its 

berth at Baltimore’s Inner Harbor. This 

action will restrict vessel traffic in 

portions of the Patapsco River, 

Northwest Harbor, and Inner Harbor 

during these events. 

DATES: Comments and related material 

must reach the Coast Guard on or before 

May 30, 2008. 

ADDRESSES: You may submit comments 

identified by Coast Guard docket 

number USCG–2008–0180 to the Docket 

Management Facility at the U.S. 

Department of Transportation. To avoid 

duplication, please use only one of the 

following methods: 

(1) Online: http:// 

www.regulations.gov. 

(2) Mail: Docket Management Facility 

(M–30), U.S. Department of 

Transportation, West Building Ground 

Floor, Room W12–140, 1200 New Jersey 

Avenue, SE., Washington, DC 20590–

0001. 

(3) Hand delivery: Room W12–140 on 

the Ground Floor of the West Building, 

1200 New Jersey Avenue, SE., 

Washington, DC 20590, between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. The telephone 

number is 202–366–9329. 

(4) Fax: 202–493–2251. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this proposed 

rule, call Mr. Ronald Houck, at Coast 

Guard Sector Baltimore, Waterways 

Management Division, at telephone 

number (410) 576–2674 or (410) 576–

2693. If you have questions on viewing 

or submitting material to the docket, call 

Renee V. Wright, Program Manager, 

Docket Operations, telephone 202–366–

9826. 

SUPPLEMENTARY INFORMATION: 

Public Participation and Request for 

Comments 

We encourage you to participate in 

this rulemaking by submitting 

comments and related materials. All 

comments received will be posted, 

without change, to http:// 

www.regulations.gov and will include 

any personal information you have 

provided. We have an agreement with 

the Department of Transportation (DOT) 

to use the Docket Management Facility. 

Please see DOT’s ‘‘Privacy Act’’

paragraph below. 


rfrederick on PROD1PC67 with PROPOSALS