113TH CONGRESS 

2D SESSION S. 2511 

AN ACT 

To amend the Employee Retirement Income Security Act 

of 1974 to clarify the definition of substantial cessation 

of operations. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 
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1 SECTION 1. SUBSTANTIAL CESSATION OF OPERATIONS. 

2 (a) IN GENERAL.—Subsection (e) of section 4062 of 

3 the Employee Retirement Income Security Act of 1974 

4 (29 U.S.C. 1362) is amended to read as follows: 

5 ‘‘(e) TREATMENT OF SUBSTANTIAL CESSATION OF

6 OPERATIONS.— 

7 ‘‘(1) GENERAL RULE.—Except as provided in 

8 paragraphs (3) and (4), if there is a substantial ces9 sation of operations at a facility in any location, the 

10 employer shall be treated with respect to any single 

11 employer plan established and maintained by the 

12 employer covering participants at such facility as if 

13 the employer were a substantial employer under a 

14 plan under which more than one employer makes 

15 contributions and the provisions of sections 4063, 

16 4064, and 4065 shall apply. 

17 ‘‘(2) SUBSTANTIAL CESSATION OF OPER18 ATIONS.—For purposes of this subsection: 

19 ‘‘(A) IN GENERAL.—The term ‘substantial 

20 cessation of operations’ means a permanent ces21 sation of operations at a facility which results 

22 in a workforce reduction of a number of eligible 

23 employees at the facility equivalent to more 

24 than 15 percent of the number of all eligible 

25 employees of the employer, determined imme26 diately before the earlier of— 
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1 ‘‘(i) the date of the employer’s deci2 sion to implement such cessation, or 

3 ‘‘(ii) in the case of a workforce reduc4 tion which includes 1 or more eligible em5 ployees described in paragraph (6)(B), the 

6 earliest date on which any such eligible 

7 employee was separated from employment. 

8 ‘‘(B) WORKFORCE REDUCTION.—Subject 

9 to subparagraphs (C) and (D), the term ‘work10 force reduction’ means the number of eligible 

11 employees at a facility who are separated from 

12 employment by reason of the permanent ces13 sation of operations of the employer at the fa14 cility. 

15 ‘‘(C) RELOCATION OF WORKFORCE.—An 

16 eligible employee separated from employment at 

17 a facility shall not be taken into account in 

18 computing a workforce reduction if, within a 

19 reasonable period of time, the employee is re20 placed by the employer, at the same or another 

21 facility located in the United States, by an em22 ployee who is a citizen or resident of the United 

23 States. 

24 ‘‘(D) DISPOSITIONS.—If, whether by rea25 son of a sale or other disposition of the assets 
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1 or stock of a contributing sponsor (or any mem2 ber of the same controlled group as such a 

3 sponsor) of the plan relating to operations at a 

4 facility or otherwise, an employer (the ‘trans5 feree employer’) other than the employer which 

6 experiences the substantial cessation of oper7 ations (the ‘transferor employer’) conducts any 

8 portion of such operations, then— 

9 ‘‘(i) an eligible employee separated 

10 from employment with the transferor em11 ployer at the facility shall not be taken 

12 into account in computing a workforce re13 duction if— 

14 ‘‘(I) within a reasonable period of 

15 time, the employee is replaced by the 

16 transferee employer by an employee 

17 who is a citizen or resident of the 

18 United States; and 

19 ‘‘(II) in the case of an eligible 

20 employee who is a participant in a 

21 single employer plan maintained by 

22 the transferor employer, the trans23 feree employer, within a reasonable 

24 period of time, maintains a single em25 ployer plan which includes the assets 
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1 and liabilities attributable to the ac2 crued benefit of the eligible employee 

3 at the time of separation from em4 ployment with the transferor em5 ployer; and 

6 ‘‘(ii) an eligible employee who con7 tinues to be employed at the facility by the 

8 transferee employer shall not be taken into 

9 account in computing a workforce reduc10 tion if— 

11 ‘‘(I) the eligible employee is not a 

12 participant in a single employer plan 

13 maintained by the transferor em14 ployer, or 

15 ‘‘(II) in any other case, the 

16 transferee employer, within a reason17 able period of time, maintains a single 

18 employer plan which includes the as19 sets and liabilities attributable to the 

20 accrued benefit of the eligible em21 ployee at the time of separation from 

22 employment with the transferor em23 ployer. 

24 ‘‘(3) EXEMPTION FOR PLANS WITH LIMITED

25 UNDERFUNDING.—Paragraph (1) shall not apply 
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1 with respect to a single employer plan if, for the 

2 plan year preceding the plan year in which the ces3 sation occurred— 

4 ‘‘(A) there were fewer than 100 partici5 pants with accrued benefits under the plan as 

6 of the valuation date of the plan for the plan 

7 year (as determined under section 303(g)(2)); 

8 or 

9 ‘‘(B) the ratio of the market value of the 

10 assets of the plan to the funding target of the 

11 plan for the plan year was 90 percent or great12 er. 

13 ‘‘(4) ELECTION TO MAKE ADDITIONAL CON14 TRIBUTIONS TO SATISFY LIABILITY.— 

15 ‘‘(A) IN GENERAL.—An employer may 

16 elect to satisfy the employer’s liability with re17 spect to a plan by reason of paragraph (1) by 

18 making additional contributions to the plan in 

19 the amount determined under subparagraph 

20 (B) for each plan year in the 7-plan-year period 

21 beginning with the plan year in which the ces22 sation occurred. Any such additional contribu23 tion for a plan year shall be in addition to any 

24 minimum required contribution under section 
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1 303 for such plan year and shall be paid not 

2 later than the earlier of— 

3 ‘‘(i) the due date for the minimum re4 quired contribution for such year under 

5 section 303(j); or 

6 ‘‘(ii) in the case of the first such con7 tribution, the date that is 1 year after the 

8 date on which the employer notifies the 

9 Corporation of the substantial cessation of 

10 operations or the date the Corporation de11 termines a substantial cessation of oper12 ations has occurred, and in the case of 

13 subsequent contributions, the same date in 

14 each succeeding year. 

15 ‘‘(B) AMOUNT DETERMINED.— 

16 ‘‘(i) IN GENERAL.—Except as pro17 vided in clause (iii), the amount deter18 mined under this subparagraph with re19 spect to each plan year in the 7-plan-year 

20 period is the product of— 

‘‘(I) 1 21 ⁄7 of the unfunded vested 

22 benefits determined under section 

23 4006(a)(3)(E) as of the valuation 

24 date of the plan (as determined under 

25 section 303(g)(2)) for the plan year 
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1 preceding the plan year in which the 

2 cessation occurred; and 

3 ‘‘(II) the reduction fraction. 

4 ‘‘(ii) REDUCTION FRACTION.—For 

5 purposes of clause (i), the reduction frac6 tion of a single employer plan is equal to— 

7 ‘‘(I) the number of participants 

8 with accrued benefits in the plan who 

9 were included in computing the work10 force reduction under paragraph 

11 (2)(B) as a result of the cessation of 

12 operations at the facility; divided by 

13 ‘‘(II) the number of eligible em14 ployees of the employer who are par15 ticipants with accrued benefits in the 

16 plan, determined as of the same date 

17 the determination under paragraph 

18 (2)(A) is made. 

19 ‘‘(iii) LIMITATION.—The additional 

20 contribution under this subparagraph for 

21 any plan year shall not exceed the excess, 

22 if any, of— 

23 ‘‘(I) 25 percent of the difference 

24 between the market value of the as25 sets of the plan and the funding tar-
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1 get of the plan for the preceding plan 

2 year; over 

3 ‘‘(II) the minimum required con4 tribution under section 303 for the 

5 plan year. 

6 ‘‘(C) PERMITTED CESSATION OF ANNUAL

7 INSTALLMENTS WHEN PLAN BECOMES SUFFI8 CIENTLY FUNDED.—An employer’s obligation to 

9 make additional contributions under this para10 graph shall not apply to— 

11 ‘‘(i) the first plan year (beginning on 

12 or after the first day of the plan year in 

13 which the cessation occurs) for which the 

14 ratio of the market value of the assets of 

15 the plan to the funding target of the plan 

16 for the plan year is 90 percent or greater, 

17 or 

18 ‘‘(ii) any plan year following such first 

19 plan year. 

20 ‘‘(D) COORDINATION WITH FUNDING WAIV21 ERS.— 

22 ‘‘(i) IN GENERAL.—If the Secretary of 

23 the Treasury issues a funding waiver 

24 under section 302(c) with respect to the 

25 plan for a plan year in the 7-plan-year pe-
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1 riod under subparagraph (A), the addi2 tional contribution with respect to such 

3 plan year shall be permanently waived. 

4 ‘‘(ii) NOTICE.—An employer main5 taining a plan with respect to which such 

6 a funding waiver has been issued or a re7 quest for such a funding waiver is pending 

8 shall provide notice to the Secretary of the 

9 Treasury, in such form and at such time 

10 as the Secretary of the Treasury shall pro11 vide, of a cessation of operations to which 

12 paragraph (1) applies. 

13 ‘‘(E) ENFORCEMENT.— 

14 ‘‘(i) NOTICE.—An employer making 

15 the election under this paragraph shall 

16 provide notice to the Corporation, in ac17 cordance with rules prescribed by the Cor18 poration, of— 

19 ‘‘(I) such election, not later than 

20 30 days after the earlier of the date 

21 the employer notifies the Corporation 

22 of the substantial cessation of oper23 ations or the date the Corporation de24 termines a substantial cessation of op25 erations has occurred; 
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1 ‘‘(II) the payment of each addi2 tional contribution, not later than 10 

3 days after such payment; 

4 ‘‘(III) any failure to pay the ad5 ditional contribution in the full 

6 amount for any year in the 7-plan7 year period, not later than 10 days 

8 after the due date for such payment; 

9 ‘‘(IV) the waiver under subpara10 graph (D)(i) of the obligation to make 

11 an additional contribution for any 

12 year, not later than 30 days after the 

13 funding waiver described in such sub14 paragraph is granted; and 

15 ‘‘(V) the cessation of any obliga16 tion to make additional contributions 

17 under subparagraph (C), not later 

18 than 10 days after the due date for 

19 payment of the additional contribution 

20 for the first plan year to which such 

21 cessation applies. 

22 ‘‘(ii) ACCELERATION OF LIABILITY TO

23 THE PLAN FOR FAILURE TO PAY.—If an 

24 employer fails to pay the additional con25 tribution in the full amount for any year in 
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1 the 7-plan-year period by the due date for 

2 such payment, the employer shall, as of 

3 such date, be liable to the plan in an 

4 amount equal to the balance which remains 

5 unpaid as of such date of the aggregate 

6 amount of additional contributions re7 quired to be paid by the employer during 

8 such 7-year-plan period. The Corporation 

9 may waive or settle the liability described 

10 in the preceding sentence, at the discretion 

11 of the Corporation. 

12 ‘‘(iii) CIVIL ACTION.—The Corpora13 tion may bring a civil action in the district 

14 courts of the United States in accordance 

15 with section 4003(e) to compel an em16 ployer making such election to pay the ad17 ditional contributions required under this 

18 paragraph. 

19 ‘‘(5) DEFINITIONS.—For purposes of this sub20 section: 

21 ‘‘(A) ELIGIBLE EMPLOYEE.—The term ‘eli22 gible employee’ means an employee who is eligi23 ble to participate in an employee pension ben24 efit plan (as defined in section 3(2)) established 

25 and maintained by the employer. 
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1 ‘‘(B) FUNDING TARGET.—The term ‘fund2 ing target’ means, with respect to any plan 

3 year, the funding target as determined under 

4 section 4006(a)(3)(E)(iii)(I) for purposes of de5 termining the premium paid to the Corporation 

6 under section 4007 for the plan year. 

7 ‘‘(C) MARKET VALUE.—The market value 

8 of the assets of a plan shall be determined in 

9 the same manner as for purposes of section 

10 4006(a)(3)(E). 

11 ‘‘(6) SPECIAL RULES.— 

12 ‘‘(A) CHANGE IN OPERATION OF CERTAIN

13 FACILITIES AND PROPERTY.—For purposes of 

14 paragraphs (1) and (2), an employer shall not 

15 be treated as ceasing operations at a qualified 

16 lodging facility (as defined in section 

17 856(d)(9)(D) of the Internal Revenue Code of 

18 1986) if such operations are continued by an el19 igible independent contractor (as defined in sec20 tion 856(d)(9)(A) of such Code) pursuant to an 

21 agreement with the employer. 

22 ‘‘(B) AGGREGATION OF PRIOR SEPARA23 TIONS.—The workforce reduction under para24 graph (2) with respect to any cessation of oper25 ations shall be determined by taking into ac-
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1 count any separation from employment of any 

2 eligible employee at the facility (other than a 

3 separation which is not taken into account as 

4 workforce reduction by reason of subparagraph 

5 (C) or (D) of paragraph (2)) which— 

6 ‘‘(i) is related to the permanent ces7 sation of operations of the employer at the 

8 facility, and 

9 ‘‘(ii) occurs during the 3-year period 

10 preceding such cessation. 

11 ‘‘(C) NO ADDITION TO PREFUNDING BAL12 ANCE.—For purposes of section 303(f)(6)(B) 

13 and section 430(f)(6)(B) of the Internal Rev14 enue Code of 1986, any additional contribution 

15 made under paragraph (4) shall be treated in 

16 the same manner as a contribution an employer 

17 is required to make in order to avoid a benefit 

18 reduction under paragraph (1), (2), or (4) of 

19 section 206(g) or subsection (b), (c), or (e) of 

20 section 436 of the Internal Revenue Code of 

21 1986 for the plan year.’’. 

22 (b) EFFECTIVE DATE.— 

23 (1) IN GENERAL.—The amendment made by 

24 this section shall apply to a cessation of operations 
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1 or other event at a facility occurring on or after the 

2 date of enactment of this Act. 

3 (2) TRANSITION RULE.—An employer that had 

4 a cessation of operations before the date of enact5 ment of this Act (as determined under subsection 

6 4062(e) of the Employee Retirement Income Secu7 rity Act of 1974 as in effect before the amendment 

8 made by this section), but did not enter into an ar9 rangement with the Pension Benefit Guaranty Cor10 poration to satisfy the requirements of such sub11 section (as so in effect) before such date of enact12 ment, shall be permitted to make the election under 

13 section 4062(e)(4) of such Act (as in effect after the 

14 amendment made by this section) as if such ces15 sation had occurred on such date of enactment. 

16 Such election shall be made not later than 30 days 

17 after such Corporation issues, on or after such date 

18 of the enactment, a final administrative determina19 tion that a substantial cessation of operations has 

20 occurred. 

21 (c) DIRECTION TO THE CORPORATION.—The Pension 

22 Benefit Guaranty Corporation shall not take any enforce23 ment, administrative, or other action pursuant to section 

24 4062(e) of the Employee Retirement Income Security Act 

25 of 1974, or in connection with an agreement settling liabil-
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1 ity arising under such section, that is inconsistent with 

2 the amendment made by this section, without regard to 

3 whether the action relates to a cessation or other event 

4 that occurs before, on, or after the date of the enactment 

5 of this Act, unless such action is in connection with a set6 tlement agreement that is in place before June 1, 2014. 

7 The Pension Benefit Guaranty Corporation shall not ini8 tiate a new enforcement action with respect to section 

9 4062(e) of such Act that is inconsistent with its enforce10 ment policy in effect on June 1, 2014. 

Passed the Senate September 16, 2014. 

Attest: 

Secretary. 

113TH CONGRESS 

2D SESSION S. 2511 

AN ACT 

To amend the Employee Retirement Income Secustantial cessation of operations. rity Act of 1974 to clarify the definition of sub-