II 

Calendar No. 552 

113TH CONGRESS 

2D SESSION S. 2511 

To amend the Employee Retirement Income Security Act of 1974 to clarify 

the definition of substantial cessation of operations. 

IN THE SENATE OF THE UNITED STATES 

JUNE 19, 2014 

Mr. HARKIN (for himself and Mr. ALEXANDER) introduced the following bill; 

which was read twice and referred to the Committee on Health, Education, Labor, and Pensions 

SEPTEMBER 8, 2014 

Reported by Mr. HARKIN, with an amendment 

[Strike out all after the enacting clause and insert the part printed in italic] 

A BILL 

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, 

3 SECTION 1. SUBSTANTIAL CESSATION OF OPERATIONS. 

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

5 the Employee Retirement Income Security Act of 1974 

6 (29 U.S.C. 1362) is amended— 


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1 (1) by striking ‘‘OPERATIONS.—If an employer’’ 

2 and inserting ‘‘OPERATIONS.— 

3 ‘‘(1) IN GENERAL.—If an employer’’; and 

4 (2) by adding at the end the following: 

5 ‘‘(2) SUBSTANTIAL CESSATION OF OPER6 ATIONS.—An employer shall not be treated as hav7 ing a cessation described in paragraph (1) unless— 

8 ‘‘(A) all operations at a facility in a loca9 tion are ceased, and— 

10 ‘‘(i) such cessation is reasonably ex11 pected to be permanent; 

12 ‘‘(ii) no portion of such operations is 

13 moved to another facility at a different lo14 cation; 

15 ‘‘(iii) no portion of such operations is 

16 assumed by or otherwise transferred to an17 other employer; and 

18 ‘‘(iv) no other operations are reason19 ably expected to be maintained at such fa20 cility; and 

21 ‘‘(B) as a result of the cessation described 

22 in subparagraph (A), more than 20 percent of 

23 the employees of the employer have a termi24 nation of employment that is reasonably ex25 pected to be permanent. 


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1 For purposes of subparagraph (B), all employees 

2 treated as employed by a single employer under sec3 tions 210 (c) and (d) shall be treated as employees 

4 of the employer.’’. 

5 (b) DIRECTION TO THE CORPORATION.—The Pen6 sion Benefit Guaranty Corporation shall not take any en7 forcement, administrative, or other action pursuant to sec8 tion 4062(e) of the Employee Retirement Income Security 

9 Act of 1974 that is inconsistent with subparagraph (A) 

10 of section 4062(e)(2) of such Act, as added by subsection 

11 (a), without regard to whether the action relates to a ces12 sation or other event that occurs before or after the date 

13 of enactment of this Act, unless such action is in connec14 tion with a settlement agreement in place before June 1, 

15 2014. 

16 SECTION 1. SUBSTANTIAL CESSATION OF OPERATIONS. 

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

18 the Employee Retirement Income Security Act of 1974 (29 

19 U.S.C. 1362) is amended to read as follows: 

20 ‘‘(e) TREATMENT OF SUBSTANTIAL CESSATION OF OP21 ERATIONS.— 

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

23 paragraphs (3) and (4), if there is a substantial ces24 sation of operations at a facility in any location, the 

25 employer shall be treated with respect to any single 


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1 employer plan established and maintained by the em2 ployer covering participants at such facility as if the 

3 employer were a substantial employer under a plan 

4 under which more than one employer makes contribu5 tions and the provisions of sections 4063, 4064, and 

6 4065 shall apply. 

7 ‘‘(2) SUBSTANTIAL CESSATION OF OPER8 ATIONS.—For purposes of this subsection: 

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

10 cessation of operations’ means a permanent ces11 sation of operations at a facility which results in 

12 a workforce reduction of a number of eligible em13 ployees at the facility equivalent to more than 15 

14 percent of the number of all eligible employees of 

15 the employer, determined immediately before the 

16 earlier of— 

17 ‘‘(i) the date of the employer’s decision 

18 to implement such cessation, or 

19 ‘‘(ii) in the case of a workforce reduc20 tion which includes 1 or more eligible em21 ployees described in paragraph (6)(B), the 

22 earliest date on which any such eligible em23 ployee was separated from employment. 

24 ‘‘(B) WORKFORCE REDUCTION.—Subject to 

25 subparagraphs (C) and (D), the term ‘workforce 


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1 reduction’ means the number of eligible employ2 ees at a facility who are separated from employ3 ment by reason of the permanent cessation of op4 erations of the employer at the facility. 

5 ‘‘(C) RELOCATION OF WORKFORCE.—An eli6 gible employee separated from employment at a 

7 facility shall not be taken into account in com8 puting a workforce reduction if, within a reason9 able period of time, the employee is replaced by 

10 the employer, at the same or another facility lo11 cated in the United States, by an employee who 

12 is a citizen or resident of the United States. 

13 ‘‘(D) DISPOSITIONS.—If, whether by reason 

14 of a sale or other disposition of the assets or 

15 stock of a contributing sponsor (or any member 

16 of the same controlled group as such a sponsor) 

17 of the plan relating to operations at a facility or 

18 otherwise, an employer (the ‘transferee em19 ployer’) other than the employer which experi20 ences the substantial cessation of operations ( the 

21 ‘transferor employer’) conducts any portion of 

22 such operations, then— 

23 ‘‘(i) an eligible employee separated 

24 from employment with the transferor em25 ployer at the facility shall not be taken into 


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1 account in computing a workforce reduction 

2 if— 

3 ‘‘(I) within a reasonable period of 

4 time, the employee is replaced by the 

5 transferee employer by an employee 

6 who is a citizen or resident of the 

7 United States; and 

8 ‘‘(II) in the case of an eligible em9 ployee who is a participant in a single 

10 employer plan maintained by the 

11 transferor employer, the transferee em12 ployer, within a reasonable period of 

13 time, maintains a single employer 

14 plan which includes the assets and li15 abilities attributable to the accrued 

16 benefit of the eligible employee at the 

17 time of separation from employment 

18 with the transferor employer; and 

19 ‘‘(ii) an eligible employee who con20 tinues to be employed at the facility by the 

21 transferee employer shall not be taken into 

22 account in computing a workforce reduction 

23 if— 

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

25 participant in a single employer plan 


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1 maintained by the transferor employer, 

2 or 

3 ‘‘(II) in any other case, the trans4 feree employer, within a reasonable pe5 riod of time, maintains a single em6 ployer plan which includes the assets 

7 and liabilities attributable to the ac8 crued benefit of the eligible employee at 

9 the time of separation from employ10 ment with the transferor employer. 

11 ‘‘(3) EXEMPTION FOR PLANS WITH LIMITED

12 UNDERFUNDING.—Paragraph (1) shall not apply 

13 with respect to a single employer plan if, for the plan 

14 year preceding the plan year in which the cessation 

15 occurred— 

16 ‘‘(A) there were fewer than 100 participants 

17 with accrued benefits under the plan as of the 

18 valuation date of the plan for the plan year (as 

19 determined under section 303(g)(2)); or 

20 ‘‘(B) the ratio of the market value of the as21 sets of the plan to the funding target of the plan 

22 for the plan year was 90 percent or greater. 

23 ‘‘(4) ELECTION TO MAKE ADDITIONAL CONTRIBU24 TIONS TO SATISFY LIABILITY.— 


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1 ‘‘(A) IN GENERAL.—An employer may elect 

2 to satisfy the employer’s liability with respect to 

3 a plan by reason of paragraph (1) by making 

4 additional contributions to the plan in the 

5 amount determined under subparagraph (B) for 

6 each plan year in the 7-plan-year period begin7 ning with the plan year in which the cessation 

8 occurred. Any such additional contribution for a 

9 plan year shall be in addition to any minimum 

10 required contribution under section 303 for such 

11 plan year and shall be paid not later than the 

12 earlier of— 

13 ‘‘(i) the due date for the minimum re14 quired contribution for such year under sec15 tion 303(j); or 

16 ‘‘(ii) in the case of the first such con17 tribution, the date that is 1 year after the 

18 date on which the employer notifies the Cor19 poration of the substantial cessation of oper20 ations or the date the Corporation deter21 mines a substantial cessation of operations 

22 has occurred, and in the case of subsequent 

23 contributions, the same date in each suc24 ceeding year. 

25 ‘‘(B) AMOUNT DETERMINED.— 


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1 ‘‘(i) IN GENERAL.—Except as provided 

2 in clause (iii), the amount determined 

3 under this subparagraph with respect to 

4 each plan year in the 7-plan-year period is 

5 the product of— 

‘‘(I) 1 6 ⁄7 of the unfunded vested 

7 benefits determined under section 

8 4006(a)(3)(E) as of the valuation date 

9 of the plan (as determined under sec10 tion 303(g)(2)) for the plan year pre11 ceding the plan year in which the ces12 sation occurred; and 

13 ‘‘(II) the reduction fraction. 

14 ‘‘(ii) REDUCTION FRACTION.—For pur15 poses of clause (i), the reduction fraction of 

16 a single employer plan is equal to— 

17 ‘‘(I) the number of participants 

18 with accrued benefits in the plan who 

19 were included in computing the work20 force reduction under paragraph 

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

22 operations at the facility; divided by 

23 ‘‘(II) the number of eligible em24 ployees of the employer who are par25 ticipants with accrued benefits in the 


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1 plan, determined as of the same date 

2 the determination under paragraph 

3 (2)(A) is made. 

4 ‘‘(iii) LIMITATION.—The additional 

5 contribution under this subparagraph for 

6 any plan year shall not exceed the excess, if 

7 any, of— 

8 ‘‘(I) 25 percent of the difference 

9 between the market value of the assets 

10 of the plan and the funding target of 

11 the plan for the preceding plan year; 

12 over 

13 ‘‘(II) the minimum required con14 tribution under section 303 for the 

15 plan year. 

16 ‘‘(C) PERMITTED CESSATION OF ANNUAL IN17 STALLMENTS WHEN PLAN BECOMES SUFFI18 CIENTLY FUNDED.—An employer’s obligation to 

19 make additional contributions under this para20 graph shall not apply to— 

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

22 or after the first day of the plan year in 

23 which the cessation occurs) for which the 

24 ratio of the market value of the assets of the 


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1 plan to the funding target of the plan for 

2 the plan year is 90 percent or greater, or 

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

4 plan year. 

5 ‘‘(D) COORDINATION WITH FUNDING WAIV6 ERS.— 

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

8 the Treasury issues a funding waiver under 

9 section 302(c) with respect to the plan for 

10 a plan year in the 7-plan-year period under 

11 subparagraph (A), the additional contribu12 tion with respect to such plan year shall be 

13 permanently waived. 

14 ‘‘(ii) NOTICE.—An employer maintain15 ing a plan with respect to which such a 

16 funding waiver has been issued or a request 

17 for such a funding waiver is pending shall 

18 provide notice to the Secretary of the Treas19 ury, in such form and at such time as the 

20 Secretary of the Treasury shall provide, of 

21 a cessation of operations to which para22 graph (1) applies. 

23 ‘‘(E) ENFORCEMENT.— 

24 ‘‘(i) NOTICE.—An employer making 

25 the election under this paragraph shall proVerDate Mar 15 2010 23:29 Sep 08, 2014 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6203 E:\BILLS\S2511.RS S2511

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1 vide notice to the Corporation, in accord2 ance with rules prescribed by the Corpora3 tion, of— 

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

5 30 days after the earlier of the date the 

6 employer notifies the Corporation of 

7 the substantial cessation of operations 

8 or the date the Corporation determines 

9 a substantial cessation of operations 

10 has occurred; 

11 ‘‘(II) the payment of each addi12 tional contribution, not later than 10 

13 days after such payment; 

14 ‘‘(III) any failure to pay the ad15 ditional contribution in the full 

16 amount for any year in the 7-plan17 year period, not later than 10 days 

18 after the due date for such payment; 

19 ‘‘(IV) the waiver under subpara20 graph (D)(i) of the obligation to make 

21 an additional contribution for any 

22 year, not later than 30 days after the 

23 funding waiver described in such sub24 paragraph is granted; and 


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1 ‘‘(V) the cessation of any obliga2 tion to make additional contributions 

3 under subparagraph (C), not later 

4 than 10 days after the due date for 

5 payment of the additional contribution 

6 for the first plan year to which such 

7 cessation applies. 

8 ‘‘(ii) ACCELERATION OF LIABILITY TO

9 THE PLAN FOR FAILURE TO PAY.—If an em10 ployer fails to pay the additional contribu11 tion in the full amount for any year in the 

12 7-plan-year period by the due date for such 

13 payment, the employer shall, as of such 

14 date, be liable to the plan in an amount 

15 equal to the balance which remains unpaid 

16 as of such date of the aggregate amount of 

17 additional contributions required to be paid 

18 by the employer during such 7-year-plan 

19 period. The Corporation may waive or settle 

20 the liability described in the preceding sen21 tence, at the discretion of the Corporation. 

22 ‘‘(iii) CIVIL ACTION.—The Corporation 

23 may bring a civil action in the district 

24 courts of the United States in accordance 

25 with section 4003(e) to compel an employer 


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1 making such election to pay the additional 

2 contributions required under this para3 graph. 

4 ‘‘(5) DEFINITIONS.—For purposes of this sub5 section: 

6 ‘‘(A) ELIGIBLE EMPLOYEE.—The term ‘eli7 gible employee’ means an employee who is eligi8 ble to participate in an employee pension benefit 

9 plan (as defined in section 3(2)) established and 

10 maintained by the employer. 

11 ‘‘(B) FUNDING TARGET.—The term ‘funding 

12 target’ means, with respect to any plan year, the 

13 funding target as determined under section 

14 4006(a)(3)(E)(iii)(I) for purposes of determining 

15 the premium paid to the Corporation under sec16 tion 4007 for the plan year. 

17 ‘‘(C) MARKET VALUE.—The market value of 

18 the assets of a plan shall be determined in the 

19 same manner as for purposes of section 

20 4006(a)(3)(E). 

21 ‘‘(6) SPECIAL RULES.— 

22 ‘‘(A) CHANGE IN OPERATION OF CERTAIN

23 FACILITIES AND PROPERTY.—For purposes of 

24 paragraphs (1) and (2), an employer shall not be 

25 treated as ceasing operations at a qualified lodgVerDate Mar 15 2010 23:29 Sep 08, 2014 Jkt 039200 PO 00000 Frm 00014 Fmt 6652 Sfmt 6203 E:\BILLS\S2511.RS S2511

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1 ing facility (as defined in section 856(d)(9)(D) 

2 of the Internal Revenue Code of 1986) if such op3 erations are continued by an eligible inde4 pendent contractor (as defined in section 

5 856(d)(9)(A) of such Code) pursuant to an agree6 ment with the employer. 

7 ‘‘(B) AGGREGATION OF PRIOR SEPARA8 TIONS.—The workforce reduction under para9 graph (2) with respect to any cessation of oper10 ations shall be determined by taking into ac11 count any separation from employment of any 

12 eligible employee at the facility (other than a 

13 separation which is not taken into account as 

14 workforce reduction by reason of subparagraph 

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

16 ‘‘(i) is related to the permanent ces17 sation of operations of the employer at the 

18 facility, and 

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

20 preceding such cessation. 

21 ‘‘(C) NO ADDITION TO PREFUNDING BAL22 ANCE.—For purposes of section 303(f)(6)(B) and 

23 section 430(f)(6)(B) of the Internal Revenue 

24 Code of 1986, any additional contribution made 

25 under paragraph (4) shall be treated in the same 


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1 manner as a contribution an employer is re2 quired to make in order to avoid a benefit reduc3 tion under paragraph (1), (2), or (4) of section 

4 206(g) or subsection (b), (c), or (e) of section 436 

5 of the Internal Revenue Code of 1986 for the 

6 plan year.’’. 

7 (b) EFFECTIVE DATE.— 

8 (1) IN GENERAL.—The amendment made by this 

9 section shall apply to a cessation of operations or 

10 other event at a facility occurring on or after the date 

11 of enactment of this Act. 

12 (2) TRANSITION RULE.—An employer that had a 

13 cessation of operations before the date of enactment of 

14 this Act (as determined under subsection 4062(e) of 

15 the Employee Retirement Income Security Act of 

16 1974 as in effect before the amendment made by this 

17 section), but did not enter into an arrangement with 

18 the Pension Benefit Guaranty Corporation to satisfy 

19 the requirements of such subsection (as so in effect) 

20 before such date of enactment, shall be permitted to 

21 make the election under section 4062(e)(4) of such Act 

22 (as in effect after the amendment made by this sec23 tion) as if such cessation had occurred on such date 

24 of enactment. Such election shall be made not later 

25 than 30 days after such Corporation issues, on or 


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1 after such date of the enactment, a final administra2 tive determination that a substantial cessation of op3 erations has occurred. 

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

5 Benefit Guaranty Corporation shall not take any enforce6 ment, administrative, or other action pursuant to section 

7 4062(e) of the Employee Retirement Income Security Act 

8 of 1974, or in connection with an agreement settling liabil9 ity arising under such section, that is inconsistent with the 

10 amendment made by this section, without regard to whether 

11 the action relates to a cessation or other event that occurs 

12 before, on, or after the date of the enactment of this Act, 

13 unless such action is in connection with a settlement agree14 ment that is in place before June 1, 2014. The Pension Ben15 efit Guaranty Corporation shall not initiate a new enforce16 ment action with respect to section 4062(e) of such Act that 

17 is inconsistent with its enforcement policy in effect on June 

18 1, 2014. 


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Calendar No. 552 

113TH CONGRESS 

2D SESSION S. 2511 

A BILL 

To amend the Employee Retirement Income Secustantial cessation of operations. rity Act of 1974 to clarify the definition of subSEPTEMBER 8, 2014 

Reported with an amendment 


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