264
The schedule or schedules described in subparagraph 
(B)(i) shall reflect reductions in future benefit ac-
cruals and adjustable benefits, and increases in con-
tributions, that the plan sponsor determines are rea-
sonably necessary to emerge from critical status. 
One schedule shall be designated as the default 
schedule and such schedule shall assume that there 
are no increases in contributions under the plan 
other than the increases necessary to emerge from 
critical status after future benefit accruals and other 
benefits (other than benefits the reduction or elimi-
nation of which are not permitted under section 
204(g)) have been reduced to the maximum extent 
permitted by law. 
‘‘(2) EXCEPTION FOR YEARS AFTER PROCESS 
BEGINS.—Paragraph (1) shall not apply to a plan 
year if such year is in a rehabilitation plan adoption 
period or rehabilitation period by reason of the plan 
being in critical status for a preceding plan year. 
For purposes of this section, such preceding plan 
year shall be the initial critical year with respect to 
the rehabilitation plan to which it relates. 
‘‘(3) REHABILITATION PLAN.—For purposes of 
this section—
265
‘‘(A) IN GENERAL.—A rehabilitation plan 
is a plan which consists of—
‘‘(i) actions, including options or a 
range of options to be proposed to the bar-
gaining parties, formulated, based on rea-
sonably anticipated experience and reason-
able actuarial assumptions, to enable the 
plan to cease to be in critical status by the 
end of the rehabilitation period and may 
include reductions in plan expenditures (in-
cluding plan mergers and consolidations), 
reductions in future benefit accruals or in-
creases in contributions, if agreed to by the 
bargaining parties, or any combination of 
such actions, or 
‘‘(ii) if the plan sponsor determines 
that, based on reasonable actuarial as-
sumptions and upon exhaustion of all rea-
sonable measures, the plan can not reason-
ably be expected to emerge from critical 
status by the end of the rehabilitation pe-
riod, reasonable measures to emerge from 
critical status at a later time or to forestall 
possible insolvency (within the meaning of 
section 4245).
266
A rehabilitation plan must provide annual 
standards for meeting the requirements of such 
rehabilitation plan. Such plan shall also include 
the schedules required to be provided under 
paragraph (1)(B)(i) and if clause (ii) applies, 
shall set forth the alternatives considered, ex-
plain why the plan is not reasonably expected to 
emerge from critical status by the end of the re-
habilitation period, and specify when, if ever, 
the plan is expected to emerge from critical sta-
tus in accordance with the rehabilitation plan. 
‘‘(B) UPDATES TO REHABILITATION PLAN 
AND SCHEDULES.—
‘‘(i) 
REHABILITATION
PLAN.—The 
plan sponsor shall annually update the re-
habilitation plan and shall file the update 
with the plan’s annual report under section 
104. 
‘‘(ii) SCHEDULES.—The plan sponsor 
shall annually update any schedule of con-
tribution rates provided under this sub-
section to reflect the experience of the 
plan. 
‘‘(iii) DURATION
OF
SCHEDULE.—A 
schedule of contribution rates provided by
267
the plan sponsor and relied upon by bar-
gaining parties in negotiating a collective 
bargaining agreement shall remain in ef-
fect for the duration of that collective bar-
gaining agreement. 
‘‘(C) IMPOSITION OF DEFAULT SCHEDULE 
WHERE
FAILURE
TO
ADOPT
REHABILITATION 
PLAN.—
‘‘(i) IN GENERAL.—If—
‘‘(I) a collective bargaining agree-
ment 
providing 
for 
contributions 
under a multiemployer plan that was 
in effect at the time the plan entered 
critical status expires, and 
‘‘(II) after receiving one or more 
schedules from the plan sponsor under 
paragraph (1)(B), the bargaining par-
ties with respect to such agreement 
fail to adopt a contribution or benefit 
schedules with terms consistent with 
the rehabilitation plan and the sched-
ule from the plan sponsor under para-
graph (1)(B)(i), 
the plan sponsor shall implement the de-
fault schedule described in the last sen-
268
tence of paragraph (1) beginning on the 
date specified in clause (ii). 
‘‘(ii) DATE
OF
IMPLEMENTATION.—
The date specified in this clause is the ear-
lier of the date—
‘‘(I) on which the Secretary cer-
tifies that the parties are at an im-
passe, or 
‘‘(II) which is 180 days after the 
date on which the collective bar-
gaining agreement described in clause 
(i) expires. 
‘‘(4) REHABILITATION PERIOD.—For purposes 
of this section—
‘‘(A) IN GENERAL.—The rehabilitation pe-
riod for a plan in critical status is the 10-year 
period beginning on the first day of the first 
plan year of the multiemployer plan following 
the earlier of—
‘‘(i) the second anniversary of the 
date of the adoption of the rehabilitation 
plan, or 
‘‘(ii) the expiration of the collective 
bargaining agreements in effect on the 
date of the due date for the actuarial cer-
269
tification of critical status for the initial 
critical year under subsection (a)(1) and 
covering, as of such date at least 75 per-
cent of the active participants in such mul-
tiemployer plan. 
If a plan emerges from critical status as pro-
vided under subparagraph (B) before the end of 
such 10-year period, the rehabilitation period 
shall end with the plan year preceding the plan 
year for which the determination under sub-
paragraph (B) is made. 
‘‘(B) EMERGENCE.—A plan in critical sta-
tus shall remain in such status until a plan 
year for which the plan actuary certifies, in ac-
cordance with subsection (b)(3)(A), that the 
plan is not projected to have an accumulated 
funding deficiency for the plan year or any of 
the 9 succeeding plan years, without regard to 
the use of the shortfall method and taking into 
account any extension of amortization periods 
under section 304(d). 
‘‘(5) REHABILITATION
PLAN
ADOPTION
PE-
RIOD.—For purposes of this section, the term ‘reha-
bilitation plan adoption period’ means the period be-
ginning on the date of the certification under sub-
270
section (b)(3)(A) for the initial critical year and end-
ing on the day before the first day of the rehabilita-
tion period. 
‘‘(6) LIMITATION ON REDUCTION IN RATES OF 
FUTURE ACCRUALS.—Any reduction in the rate of 
future accruals under the default schedule described 
in paragraph (1)(B)(i) shall not reduce the rate of 
future accruals below—
‘‘(A) a monthly benefit (payable as a single 
life annuity commencing at the participant’s 
normal retirement age) equal to 1 percent of 
the contributions required to be made with re-
spect to a participant, or the equivalent stand-
ard accrual rate for a participant or group of 
participants under the collective bargaining 
agreements in effect as of the first day of the 
initial critical year, or 
‘‘(B) if lower, the accrual rate under the 
plan on such first day. 
The equivalent standard accrual rate shall be deter-
mined by the plan sponsor based on the standard or 
average contribution base units which the plan spon-
sor determines to be representative for active partici-
pants and such other factors as the plan sponsor de-
termines to be relevant. Nothing in this paragraph
271
shall be construed as limiting the ability of the plan 
sponsor to prepare and provide the bargaining par-
ties with alternative schedules to the default sched-
ule that established lower or higher accrual and con-
tribution rates than the rates otherwise described in 
this paragraph. 
‘‘(7) AUTOMATIC EMPLOYER SURCHARGE.—
‘‘(A) IMPOSITION OF SURCHARGE.—Each 
employer otherwise obligated to make contribu-
tions for the initial critical year shall be obli-
gated to pay to the plan for such year a sur-
charge equal to 5 percent of the contributions 
otherwise required under the applicable collec-
tive bargaining agreement (or other agreement 
pursuant to which the employer contributes). 
For each succeeding plan year in which the 
plan is in critical status for a consecutive period 
of years beginning with the initial critical year, 
the surcharge shall be 10 percent of the con-
tributions otherwise so required. 
‘‘(B) ENFORCEMENT
OF
SURCHARGE.—
The surcharges under subparagraph (A) shall 
be due and payable on the same schedule as the 
contributions on which the surcharges are 
based. Any failure to make a surcharge pay-
272
ment shall be treated as a delinquent contribu-
tion under section 515 and shall be enforceable 
as such. 
‘‘(C) SURCHARGE
TO
TERMINATE
UPON 
COLLECTIVE BARGAINING AGREEMENT RENEGO-
TIATION.—The surcharge under this paragraph 
shall cease to be effective with respect to em-
ployees covered by a collective bargaining agree-
ment (or other agreement pursuant to which 
the employer contributes), beginning on the ef-
fective date of a collective bargaining agreement 
(or other such agreement) that includes terms 
consistent with a schedule presented by the 
plan sponsor under paragraph (1)(B)(i), as 
modified under subparagraph (B) of paragraph 
(3). 
‘‘(D) SURCHARGE NOT TO APPLY UNTIL 
EMPLOYER RECEIVES NOTICE.—The surcharge 
under this paragraph shall not apply to an em-
ployer until 30 days after the employer has 
been notified by the plan sponsor that the plan 
is in critical status and that the surcharge is in 
effect. 
‘‘(E) SURCHARGE NOT TO GENERATE IN-
CREASED
BENEFIT
ACCRUALS.—Notwith-
273
standing any provision of a plan to the con-
trary, the amount of any surcharge under this 
paragraph shall not be the basis for any benefit 
accrual under the plan. 
‘‘(8) BENEFIT ADJUSTMENTS.—
‘‘(A) ADJUSTABLE BENEFITS.—
‘‘(i) IN
GENERAL.—Notwithstanding 
section 204(g), the plan sponsor shall, sub-
ject to the notice requirements in subpara-
graph (C), make any reductions to adjust-
able benefits which the plan sponsor deems 
appropriate, based upon the outcome of 
collective bargaining over the schedule or 
schedules 
provided 
under 
paragraph 
(1)(B)(i). 
‘‘(ii) EXCEPTION
FOR
RETIREES.—
Except in the case of adjustable benefits 
described in clause (iv)(III), the plan spon-
sor of a plan in critical status shall not re-
duce adjustable benefits of any participant 
or beneficiary whose benefit commence-
ment date is before the date on which the 
plan provides notice to the participant or 
beneficiary under subsection (b)(3)(D) for 
the initial critical year.
274
‘‘(iii) PLAN SPONSOR FLEXIBILITY.—
The plan sponsor shall include in the 
schedules provided to the bargaining par-
ties an allowance for funding the benefits 
of participants with respect to whom con-
tributions are not currently required to be 
made, and shall reduce their benefits to 
the extent permitted under this title and 
considered appropriate by the plan sponsor 
based on the plan’s then current overall 
funding status. 
‘‘(iv) 
ADJUSTABLE
BENEFIT
DE-
FINED.—For purposes of this paragraph, 
the term ‘adjustable benefit’ means—
‘‘(I) benefits, rights, and features 
under the plan, including post-retire-
ment death benefits, 60-month guar-
antees, disability benefits not yet in 
pay status, and similar benefits, 
‘‘(II) any early retirement benefit 
or retirement-type subsidy (within the 
meaning of section 204(g)(2)(A)) and 
any benefit payment option (other 
than the qualified joint-and survivor 
annuity), and
275
‘‘(III) 
benefit 
increases 
that 
would not be eligible for a guarantee 
under section 4022A on the first day 
of initial critical year because the in-
creases were adopted (or, if later, took 
effect) less than 60 months before 
such first day. 
‘‘(B) NORMAL
RETIREMENT
BENEFITS 
PROTECTED.—Except as provided in subpara-
graph (A)(iv)(III), nothing in this paragraph 
shall be construed to permit a plan to reduce 
the level of a participant’s accrued benefit pay-
able at normal retirement age. 
‘‘(C) NOTICE REQUIREMENTS.—
‘‘(i) IN GENERAL.—No reduction may 
be made to adjustable benefits under sub-
paragraph (A) unless notice of such reduc-
tion has been given at least 30 days before 
the general effective date of such reduction 
for all participants and beneficiaries to—
‘‘(I) plan participants and bene-
ficiaries, 
‘‘(II) each employer who has an 
obligation to contribute (within the
276
meaning of section 4212(a)) under the 
plan, and 
‘‘(III) each employee organization 
which, for purposes of collective bar-
gaining, represents plan participants 
employed by such an employer. 
‘‘(ii) CONTENT OF NOTICE.—The no-
tice under clause (i) shall contain—
‘‘(I) sufficient information to en-
able participants and beneficiaries to 
understand the effect of any reduction 
on their benefits, including an esti-
mate (on an annual or monthly basis) 
of any affected adjustable benefit that 
a participant or beneficiary would oth-
erwise have been eligible for as of the 
general effective date described in 
clause (i), and 
‘‘(II) information as to the rights 
and remedies of plan participants and 
beneficiaries as well as how to contact 
the Department of Labor for further 
information and assistance where ap-
propriate.
277
‘‘(iii) FORM AND MANNER.—Any no-
tice under clause (i)—
‘‘(I) shall be provided in a form 
and manner prescribed in regulations 
of the Secretary, 
‘‘(II) shall be written in a man-
ner so as to be understood by the av-
erage plan participant, and 
‘‘(III) may be provided in writ-
ten, electronic, or other appropriate 
form to the extent such form is rea-
sonably accessible to persons to whom 
the notice is required to be provided. 
The Secretary shall in the regulations pre-
scribed under subclause (I) establish a 
model notice that a plan sponsor may use 
to meet the requirements of this subpara-
graph. 
‘‘(9) ADJUSTMENTS
DISREGARDED
IN
WITH-
DRAWAL LIABILITY DETERMINATION.—
‘‘(A) BENEFIT REDUCTIONS.—Any benefit 
reductions under this subsection shall be dis-
regarded in determining a plan’s unfunded vest-
ed benefits for purposes of determining an em-
ployer’s withdrawal liability under section 4201.
278
‘‘(B) 
SURCHARGES.—Any 
surcharges 
under paragraph (7) shall be disregarded in de-
termining an employer’s withdrawal liability 
under section 4211, except for purposes of de-
termining the unfunded vested benefits attrib-
utable to an employer under section 4211(c)(4) 
or a comparable method approved under section 
4211(c)(5). 
‘‘(C) 
SIMPLIFIED
CALCULATIONS.—The 
Pension Benefit Guaranty Corporation shall 
prescribe simplified methods for the application 
of this paragraph in determining withdrawal li-
ability. 
‘‘(f) RULES
FOR OPERATION
OF PLAN DURING 
ADOPTION AND REHABILITATION PERIOD.—
‘‘(1) 
COMPLIANCE
WITH
REHABILITATION 
PLAN.—
‘‘(A) IN GENERAL.—A plan may not be 
amended after the date of the adoption of a re-
habilitation plan under subsection (e) so as to 
be inconsistent with the rehabilitation plan. 
‘‘(B) SPECIAL
RULES
FOR
BENEFIT
IN-
CREASES.—A plan may not be amended after 
the date of the adoption of a rehabilitation plan 
under subsection (e) so as to increase benefits,
279
including future benefit accruals, unless the 
plan actuary certifies that such increase is paid 
for out of additional contributions not con-
templated by the rehabilitation plan, and, after 
taking into account the benefit increase, the 
multiemployer plan still is reasonably expected 
to emerge from critical status by the end of the 
rehabilitation period on the schedule con-
templated in the rehabilitation plan. 
‘‘(2) RESTRICTION ON LUMP SUMS AND SIMI-
LAR BENEFITS.—
‘‘(A) IN GENERAL.—Effective on the date 
the notice of certification of the plan’s critical 
status for the initial critical year under sub-
section (b)(3)(D) is sent, and notwithstanding 
section 204(g), the plan shall not pay—
‘‘(i) any payment, in excess of the 
monthly amount paid under a single life 
annuity (plus any social security supple-
ments described in the last sentence of sec-
tion 204(b)(1)(G)), 
‘‘(ii) any payment for the purchase of 
an irrevocable commitment from an insurer 
to pay benefits, and
280
‘‘(iii) any other payment specified by 
the Secretary of the Treasury by regula-
tions. 
‘‘(B) 
EXCEPTION.—Subparagraph 
(A) 
shall not apply to a benefit which under section 
203(e) may be immediately distributed without 
the consent of the participant or to any makeup 
payment in the case of a retroactive annuity 
starting date or any similar payment of benefits 
owed with respect to a prior period. 
‘‘(3) ADJUSTMENTS
DISREGARDED
IN
WITH-
DRAWAL
LIABILITY
DETERMINATION.—Any benefit 
reductions under this subsection shall be disregarded 
in determining a plan’s unfunded vested benefits for 
purposes of determining an employer’s withdrawal li-
ability under section 4201. 
‘‘(4) SPECIAL RULES FOR PLAN ADOPTION PE-
RIOD.—During the rehabilitation plan adoption pe-
riod—
‘‘(A) the plan sponsor may not accept a 
collective bargaining agreement or participation 
agreement with respect to the multiemployer 
plan that provides for—
‘‘(i) a reduction in the level of con-
tributions for any participants,
281
‘‘(ii) a suspension of contributions 
with respect to any period of service, or 
‘‘(iii) any new direct or indirect exclu-
sion of younger or newly hired employees 
from plan participation, and 
‘‘(B) no amendment of the plan which in-
creases the liabilities of the plan by reason of 
any increase in benefits, any change in the ac-
crual of benefits, or any change in the rate at 
which benefits become nonforfeitable under the 
plan may be adopted unless the amendment is 
required as a condition of qualification under 
part I of subchapter D of chapter 1 of the In-
ternal Revenue Code of 1986 or to comply with 
other applicable law. 
‘‘(g) EXPEDITED RESOLUTION OF PLAN SPONSOR 
DECISIONS.—If, within 60 days of the due date for adop-
tion of a funding improvement plan or a rehabilitation 
plan under subsection (e), the plan sponsor of a plan in 
endangered status or a plan in critical status has not 
agreed on a funding improvement plan or rehabilitation 
plan, then any member of the board or group that con-
stitutes the plan sponsor may require that the plan spon-
sor enter into an expedited dispute resolution procedure