107
sist of a beginning balance of zero, increased 
and decreased to the extent provided in sub-
paragraphs (B) and (C), and adjusted further 
as provided in paragraph (3). 
‘‘(B) INCREASES.—As of the valuation 
date for each plan year beginning after 2006, 
the pre-funding balance of a plan shall be in-
creased by the amount elected by the plan spon-
sor for the plan year. Such amount shall not ex-
ceed the excess (if any) of—
‘‘(i) the aggregate total of employer 
contributions to the plan for the preceding 
plan year, over 
‘‘(ii) the minimum required contribu-
tion for such preceding plan year (in-
creased by interest on any portion of such 
minimum required contribution remaining 
unpaid, at the effective interest rate for 
the plan for the preceding plan year, for 
the period beginning with the first day of 
such preceding plan year and ending on 
the date that payment of such portion is 
made). 
‘‘(C) DECREASES.—As of the valuation 
date for each plan year after 2006, the pre-
108
funding balance of a plan shall be decreased 
(but not below zero) by the sum of—
‘‘(i) the amount credited under sub-
section (a)(4) (if any) in reducing the min-
imum required contribution of the plan for 
the preceding plan year, and 
‘‘(ii) the amount elected by the plan 
sponsor as a reduction in the pre-funding 
balance (for purposes of the determination 
under subsection (e)(1) and any other pur-
pose under this section). 
‘‘(D) 
COORDINATION
WITH
FUNDING 
STANDARD CARRYOVER BALANCE.—To the ex-
tent that any plan has a funding standard car-
ryover balance greater than zero—
‘‘(i) no amount of the pre-funding bal-
ance of such plan may be credited under 
subsection (a)(4) in reducing the minimum 
required contribution, and 
‘‘(ii) no election may be made under 
subparagraph (C)(ii). 
‘‘(E) NO
USE
OF
BALANCE
TO
REDUCE 
MINIMUM
REQUIRED
CONTRIBUTION
IF
USED 
TO
AVOID
SHORTFALL
AMORTIZATION.—The 
amount of the pre-funding balance of such plan
109
may be credited under subsection (a)(4) in re-
ducing the minimum required contribution only 
if the plan sponsor has elected to apply sub-
section (a)(2) to the plan for such plan year by 
substituting ‘subsection (e)(1)(B)’ for ‘sub-
section (e)(1)’. 
‘‘(2) FUNDING
STANDARD
CARRYOVER
BAL-
ANCE.—
‘‘(A) IN GENERAL.—The plan sponsor of a 
pension plan to which this paragraph applies 
shall maintain a funding standard carryover 
balance for purposes of this subsection. Such 
balance shall consist of a beginning balance de-
termined under subparagraph (C), decreased to 
the extent provided in subparagraph (D), and 
adjusted further as provided in paragraph (3). 
‘‘(B) PLANS TO WHICH THIS PARAGRAPH 
APPLIES.—This paragraph applies to any plan 
which—
‘‘(i) is a single-employer plan subject 
to this part, 
‘‘(ii) was in effect for a plan year be-
ginning in 2005, and 
‘‘(iii) had a positive balance in the 
funding standard account under section
110
412(b) as in effect for such plan year and 
determined as of the end of such plan year. 
‘‘(C) BEGINNING
BALANCE.—The begin-
ning balance of the funding standard carryover 
balance shall be the positive balance described 
in subparagraph (B)(iii). 
‘‘(D) DECREASES.—As of the valuation 
date for each plan year after 2006, the funding 
standard carryover balance of a plan shall be 
decreased (but not below zero) by the sum of—
‘‘(i) the amount credited under sub-
section (a)(4) (if any) in reducing the min-
imum required contribution of the plan for 
the preceding plan year, and 
‘‘(ii) the amount elected by the plan 
sponsor as a reduction in the funding 
standard carryover balance (for purposes 
of the determination under subsection 
(e)(1) and any other purpose under this 
section). 
‘‘(3) ADJUSTMENTS.—In determining the pre-
funding balance or the funding standard carryover 
balance of a plan as of the valuation date of the plan 
(before applying any increase or decrease under 
paragraph (1) or (2)), the plan sponsor shall, in ac-
111
cordance with regulations which shall be prescribed 
by the Secretary, adjust such balance of the plan so 
as to reflect the rate of net gain or loss (determined, 
notwithstanding subsection (e)(4), on the basis of 
fair market value) experienced by all plan assets for 
the period beginning with the valuation date for the 
preceding plan year and ending with the date pre-
ceding the valuation date for the current plan year, 
properly taking into account, in accordance with 
such regulations, all contributions, distributions, and 
other plan payments made during such period. 
‘‘(4) ELECTIONS.—Except as otherwise pro-
vided in this subsection, any election made under 
this subsection shall be made at such time and in 
such form and manner as the Secretary may pro-
vide. 
‘‘(5) COORDINATION WITH WAIVERS.—For pur-
poses of this subsection, the term ‘minimum re-
quired contribution’ means for any plan year the 
minimum required contribution for such plan year 
determined without regard to this subsection and by 
taking into account any waiver under section 412(c) 
and any waiver amortization charge under sub-
section (j) for such plan year.
112
‘‘(i) PAYMENT OF MINIMUM REQUIRED CONTRIBU-
TIONS.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the due date for any payment of any minimum 
required contribution for any plan year shall be 81⁄2 
months after the close of the plan year. 
‘‘(2) INTEREST.—Any payment required under 
paragraph (1) for a plan year made after the valu-
ation date for such plan year shall be increased by 
interest, for the period from the valuation date to 
the payment date, at the effective rate of interest for 
the plan for such plan year. 
‘‘(3) ACCELERATED QUARTERLY CONTRIBUTION 
SCHEDULE FOR UNDERFUNDED PLANS.—
‘‘(A) INTEREST PENALTY FOR FAILURE TO 
MEET
ACCELERATED
QUARTERLY
PAYMENT 
SCHEDULE.—In any case in which the plan has 
a funding shortfall for the preceding plan year, 
if the required installment is not paid in full, 
then the minimum required contribution for the 
plan year (as increased under paragraph (2)) 
shall be further increased by an amount equal 
to the interest on the amount of the under-
payment for the period of the underpayment, 
using an interest rate equal to the excess of—
113
‘‘(i) 175 percent of the Federal mid-
term rate (as in effect under section 1274 
for the 1st month of such plan year), over 
‘‘(ii) the effective rate of interest for 
the plan for the plan year. 
‘‘(B) AMOUNT
OF
UNDERPAYMENT, PE-
RIOD
OF
UNDERPAYMENT.—For purposes of 
subparagraph (A)—
‘‘(i) AMOUNT.—The amount of the 
underpayment shall be the excess of—
‘‘(I) the required installment, 
over 
‘‘(II) the amount (if any) of the 
installment contributed to or under 
the plan on or before the due date for 
the installment. 
‘‘(ii) PERIOD OF UNDERPAYMENT.—
The period for which any interest is 
charged under this paragraph with respect 
to any portion of the underpayment shall 
run from the due date for the installment 
to the date on which such portion is con-
tributed to or under the plan. 
‘‘(iii) ORDER
OF
CREDITING
CON-
TRIBUTIONS.—For 
purposes 
of 
clause
114
(i)(II), contributions shall be credited 
against unpaid required installments in the 
order in which such installments are re-
quired to be paid. 
‘‘(C) NUMBER
OF
REQUIRED
INSTALL-
MENTS; DUE
DATES.—For purposes of this 
paragraph—
‘‘(i) PAYABLE IN 4 INSTALLMENTS.—
There shall be 4 required installments for 
each plan year. 
‘‘(ii) TIME
FOR
PAYMENT
OF
IN-
STALLMENTS.—The due dates for required 
installments are set forth in the following 
table:
‘‘In the case of the following 
required installment:
The due date is: 
1st ...........................................................................
April 15
2nd .........................................................................
July 15
3rd ..........................................................................
October 15
4th ..........................................................................
January 15 of the fol-
lowing year 
‘‘(D) AMOUNT
OF
REQUIRED
INSTALL-
MENT.—For purposes of this paragraph—
‘‘(i) IN
GENERAL.—The amount of 
any required installment shall be 25 per-
cent of the required annual payment. 
‘‘(ii) REQUIRED ANNUAL PAYMENT.—
For purposes of clause (i), the term ‘re-
115
quired annual payment’ means the lesser 
of—
‘‘(I) 90 percent of the minimum 
required contribution (without regard 
to any waiver under section 412(c)) to 
the plan for the plan year under this 
section, or 
‘‘(II) in the case of a plan year 
beginning after 2006, 100 percent of 
the minimum required contribution 
(without regard to any waiver under 
section 412(c)) to the plan for the 
preceding plan year. 
Subclause (II) shall not apply if the pre-
ceding plan year referred to in such clause 
was not a year of 12 months. 
‘‘(E) FISCAL YEARS AND SHORT YEARS.—
‘‘(i) FISCAL YEARS.—In applying this 
paragraph to a plan year beginning on any 
date other than January 1, there shall be 
substituted for the months specified in this 
paragraph, the months which correspond 
thereto. 
‘‘(ii) SHORT PLAN YEAR.—This sub-
paragraph shall be applied to plan years of