286
‘‘(i) as of the beginning of the current 
plan year, the funded percentage of the 
plan is less than 65 percent, and 
‘‘(ii) the plan has an accumulated 
funding deficiency for the current plan 
year or is projected to have an accumu-
lated funding deficiency for any of the 4 
succeeding plan years, not taking into ac-
count any extension of amortization peri-
ods under section 431(d). 
‘‘(D) A plan is described in this subpara-
graph if—
‘‘(i)(I) the plan’s normal cost for the 
current plan year, plus interest (deter-
mined at the rate used for determining 
cost under the plan) for the current plan 
year on the amount of unfunded benefit li-
abilities under the plan as of the last date 
of the preceding plan year, exceeds 
‘‘(II) the present value, as of the be-
ginning of the current plan year, of the 
reasonably anticipated employer and em-
ployee contributions for the current plan 
year,
287
‘‘(ii) the present value, as of the be-
ginning of the current plan year, of non-
forfeitable benefits of inactive participants 
is greater than the present value, as of the 
beginning of the current plan year, of non-
forfeitable benefits of active participants, 
and 
‘‘(iii) the plan is projected to have an 
accumulated funding deficiency for the 
current plan year or any of the 4 suc-
ceeding plan years, not taking into account 
any extension of amortization periods 
under section 431(d). 
‘‘(E) A plan is described in this subpara-
graph if—
‘‘(i) the funded percentage of the plan 
is greater than 65 percent for the current 
plan year, and 
‘‘(ii) the plan is projected to have an 
accumulated funding deficiency during any 
of the succeeding 3 plan years, not taking 
into account any extension of amortization 
periods under section 431(d). 
‘‘(4) REHABILITATION PLAN.—
288
‘‘(A) IN GENERAL.—A rehabilitation plan 
shall consist of—
‘‘(i) amendments to the plan providing 
(under reasonable actuarial assumptions) 
for measures, agreed to by the bargaining 
parties, to increase contributions, reduce 
plan expenditures (including plan mergers 
and consolidations), or reduce future ben-
efit accruals, or to take any combination of 
such actions, determined necessary to 
cause the plan to cease, during the reha-
bilitation period, to be in critical status, or 
‘‘(ii) reasonable measures to forestall 
possible insolvency (within the meaning of 
section 418E) if the plan sponsor deter-
mines that, upon exhaustion of all reason-
able measures, the plan would not cease 
during the rehabilitation period to be in 
critical status. 
A rehabilitation must provide annual standards 
for meeting the requirements of such rehabilita-
tion plan. 
‘‘(B) REHABILITATION PERIOD.—The re-
habilitation period for any rehabilitation plan
289
adopted pursuant to this subsection is the 10-
year period beginning on the earlier of—
‘‘(i) the second anniversary of the 
date of the adoption of the rehabilitation 
plan, or 
‘‘(ii) the first day of the first plan 
year of the multiemployer plan following 
the plan year in which occurs the first 
date, after the date of the plan’s entry into 
critical status, as of which collective bar-
gaining agreements covering at least 75 
percent of active participants in such mul-
tiemployer plan (determined as of such 
date of entry) have expired. 
‘‘(C) REPORTING.—A summary of any re-
habilitation plan or modification thereto adopt-
ed during any plan year, together with annual 
updates regarding the funding ratio of the plan, 
shall be included in the annual report for such 
plan year under section 104(a) of the Employee 
Retirement Income Security Act of 1974 and in 
the summary annual report described in section 
104(b)(3) of such Act. 
‘‘(5) 
DEVELOPMENT
OF
REHABILITATION 
PLAN.—
290
‘‘(A) PROPOSALS BY PLAN SPONSOR.—
‘‘(i) IN
GENERAL.—Within 90 days 
after the date of entry into critical status 
(or the date as of which the requirements 
of subsection (b)(1) are not met with re-
spect to the plan), the plan sponsor shall 
propose to all bargaining parties a range of 
alternative schedules of increases in con-
tributions and reductions in future benefit 
accruals that would serve to carry out a re-
habilitation plan under this subsection. 
‘‘(ii) PROPOSAL
ASSUMING
NO
CON-
TRIBUTION
INCREASES.—Such proposals 
shall include, as one of the proposed sched-
ules, a schedule of those reductions in fu-
ture benefit accruals that would be nec-
essary to cause the plan to cease to be in 
critical status if there were no further in-
creases in rates of contribution to the plan. 
‘‘(iii) PROPOSAL
WHERE
CONTRIBU-
TIONS ARE NECESSARY.—If the plan spon-
sor determines that the plan will not cease 
to be in critical status during the rehabili-
tation period unless the plan is amended to 
provide for an increase in contributions,
291
the plan sponsor’s proposals shall include a 
schedule of those increases in contribution 
rates that would be necessary to cause the 
plan to cease to be in critical status if fu-
ture benefit accruals were reduced to the 
maximum extent permitted by law. 
‘‘(B) REQUESTS FOR ADDITIONAL SCHED-
ULES.—Upon the request of any bargaining 
party who—
‘‘(i) employs at least 5 percent of the 
active participants, or 
‘‘(ii) represents as an employee orga-
nization, for purposes of collective bar-
gaining, at least 5 percent of active partici-
pants, 
the plan sponsor shall include among the pro-
posed schedules such schedules of increases in 
contributions and reductions in future benefit 
accruals as may be specified by the bargaining 
parties. 
‘‘(C) SUBSEQUENT
AMENDMENTS.—Upon 
the adoption of a schedule of increases in con-
tributions or reductions in future benefit accru-
als as part of the rehabilitation plan, the plan 
sponsor may amend the plan thereafter to up-
292
date the schedule to adjust for any experience 
of the plan contrary to past actuarial assump-
tions, except that such an amendment may be 
made not more than once in any 3-year period. 
‘‘(D) ALLOCATION OF REDUCTIONS IN FU-
TURE BENEFIT ACCRUALS.—Any schedule con-
taining reductions in future benefit accruals 
forming a part of a rehabilitation plan shall be 
applicable with respect to any group of active 
participants who are employed by any bar-
gaining party (as an employer obligated to con-
tribute under the plan) in proportion to the ex-
tent to which increases in contributions under 
such schedule apply to such bargaining party. 
‘‘(E) LIMITATION
ON
REDUCTION
IN 
RATES OF FUTURE ACCRUALS.—Any schedule 
proposed under this paragraph shall not reduce 
the rate of future accruals below the lower of—
‘‘(i) a monthly benefit equal to 1 per-
cent of the contributions required to be 
made with respect to a participant or the 
equivalent standard accrual rate for a par-
ticipant or group of participants under the 
collective bargaining agreements in effect
293
as of the first day of the plan year in 
which the plan enters critical status, or 
‘‘(ii) if lower, the accrual rate under 
the plan on such date. 
The equivalent standard accrual rate shall be 
determined by the trustees based on the stand-
ard or average contribution base units that they 
determine to be representative for active partici-
pants and such other factors as they determine 
to be relevant. 
‘‘(F) PROTECTION
OF
RESTORED
RATES 
OF ACCRUAL.—
‘‘(i) IN GENERAL.—Any schedule pro-
posed under this paragraph shall not re-
duce the rate of future accruals below any 
restored accrual rate. 
‘‘(ii) RESTORED ACCRUAL RATE.—For 
purposes of clause (i), the term ‘restored 
accrual rate’ means a rate of benefit accru-
als which was reduced and subsequently 
restored before entry of the plan into crit-
ical status. 
‘‘(6) MAINTENANCE
OF
CONTRIBUTIONS
AND 
RESTRICTIONS ON BENEFITS PENDING ADOPTION OF 
REHABILITATION
PLAN.—The rules of paragraphs
294
(5) and (6) of subsection (b) shall apply for pur-
poses of this subsection by substituting the term ‘re-
habilitation plan’ for ‘funding improvement plan’. 
‘‘(7) SPECIAL RULES.—
‘‘(A) 
AUTOMATIC
EMPLOYER
SUR-
CHARGE.—
‘‘(i) 5 PERCENT
AND
PERCENT 
SURCHARGE.—For the first plan year in 
which the plan is in critical status, each 
employer otherwise obligated to make a 
contribution for that plan year shall be ob-
ligated to pay to the plan a surcharge 
equal to 5 percent of the contribution oth-
erwise required under the respective collec-
tive bargaining agreement (or other agree-
ment pursuant to which the employer con-
tributes). For each consecutive plan year 
thereafter in which the plan is in critical 
status, the surcharge shall be 10 percent of 
the contribution otherwise required under 
the respective collective bargaining agree-
ment (or other agreement pursuant to 
which the employer contributes). 
‘‘(ii) 
ENFORCEMENT
OF
SUR-
CHARGE.—The surcharges under clause (i)
295
shall be due and payable on the same 
schedule as the contributions on which 
they are based. Any failure to make a sur-
charge payment shall be treated as a delin-
quent contribution under section 515 of 
the Employee Retirement Income Security 
Act of 1974 and shall be enforceable as 
such. 
‘‘(iii) SURCHARGE
TO
TERMINATE 
UPON
CBA
RENEGOTIATION.—The sur-
charge under this paragraph shall cease to 
be effective with respect to employees cov-
ered by a collective bargaining agreement, 
beginning on the date on which that agree-
ment is renegotiated to include—
‘‘(I) a schedule of benefits and 
contributions published by the trust-
ees pursuant to the plan’s rehabilita-
tion plan, or 
‘‘(II) otherwise collectively bar-
gained benefit changes. 
‘‘(iv) SURCHARGE
NOT
TO
APPLY 
UNTIL
EMPLOYER
RECEIVES
30-DAY
NO-
TICE.—The surcharge under this subpara-
graph shall not apply to an employer until
296
30 days after the employer has been noti-
fied by the trustees that the plan is in crit-
ical status and that the surcharge is in ef-
fect. 
‘‘(v) SURCHARGE NOT TO GENERATE 
INCREASED
BENEFIT
ACCRUALS.—Not-
withstanding any provision of a plan to the 
contrary, the amount of any surcharge 
shall not be the basis for any benefit ac-
cruals under the plan. 
‘‘(B) BENEFIT ADJUSTMENTS.—
‘‘(i) IN GENERAL.—The trustees shall 
make appropriate reductions, if any, to ad-
justable benefits based upon the outcome 
of collective bargaining over the schedules 
provided under paragraph (5). 
‘‘(ii) RETIREE PROTECTION.—Except 
as provided in subparagraph (C), the trust-
ees of a plan in critical status may not re-
duce adjustable benefits of any participant 
or beneficiary who was in pay status at 
least one year before the first day of the 
first plan year in which the plan enters 
into critical status.
297
‘‘(iii) TRUSTEE
FLEXIBILITY.—The 
trustees shall include in the schedules pro-
vided to the bargaining parties an allow-
ance for funding the benefits of partici-
pants with respect to whom contributions 
are not currently required to be made, and 
shall reduce their benefits to the extent 
permitted under this title and considered 
appropriate based on the plan’s then cur-
rent overall funding status and its future 
prospects in light of the results of the par-
ties’ negotiations. 
‘‘(C) ADJUSTABLE
BENEFIT
DEFINED.—
For purposes of this paragraph, the term ‘ad-
justable benefit’ means—
‘‘(i) benefits, rights, and features, 
such as post-retirement death benefits, 60-
month guarantees, disability benefits not 
yet in pay status, and similar benefits, 
‘‘(ii) retirement-type subsidies, early 
retirement benefits, and benefit payment 
options (other than the 50 percent quali-
fied joint-and-survivor benefit and single 
life annuity), and
298
‘‘(iii) benefit increases that would not 
be eligible for a guarantee under section 
4022A of the Employee Retirement Income 
Security Act of 1974 on the first day of 
the plan year in which the plan enters into 
critical status because they were adopted, 
or if later, took effect less than 60 months 
before reorganization. 
‘‘(D) NORMAL
RETIREMENT
BENEFITS 
PROTECTED.—Nothing in this paragraph shall 
be construed to permit a plan to reduce the 
level of a participant’s accrued benefit payable 
at normal retirement age which is not an ad-
justable benefit. 
‘‘(E) 
ADJUSTMENTS
DISREGARDED
IN 
WITHDRAWAL LIABILITY DETERMINATION.—
‘‘(i) 
BENEFIT
REDUCTIONS.—Any 
benefit reductions under this paragraph 
shall be disregarded in determining a 
plan’s unfunded vested benefits for pur-
poses of determining an employer’s with-
drawal liability under section 4201 of the 
Employee Retirement Income Security Act 
of 1974.
299
‘‘(ii) SURCHARGES.—Any surcharges 
under this paragraph shall be disregarded 
in determining an employer’s withdrawal 
liability under section 4211 of the Em-
ployee Retirement Income Security Act of 
1974, except for purposes of determining 
the unfunded vested benefits attributable 
to an employer or under a modified attrib-
utable method adopted with the approval 
of the Pension Benefit Guaranty Corpora-
tion under subsection (c)(5) of that sec-
tion. 
‘‘(8) RESTRICTIONS UPON APPROVAL OF REHA-
BILITATION PLAN.—Upon adoption of a rehabilita-
tion plan with respect to a multiemployer plan, the 
plan may not be amended—
‘‘(A) so as to be inconsistent with the re-
habilitation plan, or 
‘‘(B) so as to increase future benefit accru-
als, unless the plan actuary certifies in advance 
that, after taking into account the proposed in-
crease, the plan is reasonably expected to cease 
to be in critical status. 
‘‘(9) IMPLEMENTATION
OF
DEFAULT
SCHED-
ULE
UPON
FAILURE
TO
ADOPT
REHABILITATION
300
PLAN.—If the plan is not amended by the end of the 
240-day period after entry into critical status to in-
clude a rehabilitation plan, the plan sponsor shall 
amend the plan to implement the schedule required 
by paragraph (5)(A)(ii). 
‘‘(10) DEEMED WITHDRAWAL.—Upon the fail-
ure of any employer who has an obligation to con-
tribute under the plan to make contributions in com-
pliance with the schedule adopted under paragraph 
(4) as part of the rehabilitation plan, the failure of 
the employer may, at the discretion of the plan spon-
sor, be treated as a withdrawal by the employer from 
the plan under section 4203 of the Employee Retire-
ment Income Security Act of 1974 or a partial with-
drawal by the employer under section 4205 of such 
Act. 
‘‘(11) SPECIAL
RULE
FOR
PLAN
AMEND-
MENTS.—A multiemployer plan in critical status 
shall not fail to meet the requirements of section 
204(g) of the Employee Retirement Income Security 
Act of 1974 or section 411(d)(6) solely by reason of 
the adoption by the plan of an amendment necessary 
to meet the requirements of this subsection. 
‘‘(d) DEFINITIONS.—For purposes of this section—
301
‘‘(1) BARGAINING
PARTY.—The term ‘bar-
gaining party’ means, in connection with a multiem-
ployer plan—
‘‘(A) an employer who has an obligation to 
contribute under the plan, and 
‘‘(B) an employee organization which, for 
purposes of collective bargaining, represents 
plan participants employed by such an em-
ployer. 
‘‘(2) FUNDED PERCENTAGE.—The term ‘fund-
ed percentage’ means the percentage expressed as a 
ratio of which—
‘‘(A) the numerator of which is the value 
of the plan’s assets, as determined under sec-
tion 431(c)(2), and 
‘‘(B) the denominator of which is the ac-
crued liability of the plan. 
‘‘(3) ACCUMULATED
FUNDING
DEFICIENCY.—
The term ‘accumulated funding deficiency’ has the 
meaning provided such term in section 431(a). 
‘‘(4) ACTIVE PARTICIPANT.—The term ‘active 
participant’ means, in connection with a multiem-
ployer plan, a participant who is in covered service 
under the plan.
302
‘‘(5) INACTIVE PARTICIPANT.—The term ‘inac-
tive participant’ means, in connection with a multi-
employer plan, a participant who—
‘‘(A) is not in covered service under the 
plan, and 
‘‘(B) is in pay status under the plan or has 
a nonforfeitable right to benefits under the 
plan. 
‘‘(6) PAY STATUS.—A person is in ‘pay status’ 
under a multiemployer plan if—
‘‘(A) at any time during the current plan 
year, such person is a participant or beneficiary 
under the plan and is paid an early, late, nor-
mal, or disability retirement benefit under the 
plan (or a death benefit under the plan related 
to a retirement benefit), or 
‘‘(B) to the extent provided in regulations 
of the Secretary, such person is entitled to such 
a benefit under the plan. 
‘‘(7) OBLIGATION TO CONTRIBUTE.—The term 
‘obligation to contribute’ has the meaning provided 
such term under section 4212(a) of the Employee 
Retirement Income Security Act of 1974. 
‘‘(8) ENTRY INTO CRITICAL STATUS.—A plan 
shall be treated as entering into critical status as of