Source: https://www.law.cornell.edu/uscode/text/26/433?qt-us_code_tabs=1
Timestamp: 2015-03-31 11:29:41
Document Index: 549205688

Matched Legal Cases: ['§ 433', '§ 433', '§ 433', '§ 202', '§ 301', '§ 401', '§ 1001', '§ 1301']

26 U.S. Code § 433 - Minimum funding standards | LII / Legal Information Institute
U.S. Code › Title 26 › Subtitle A › Chapter 1 › Subchapter D › Part III › Subpart A › § 433 26 U.S. Code § 433 - Minimum funding standards
General rule For purposes of section 412, the term “accumulated funding deficiency” for a CSEC plan means the excess of the total charges to the funding standard account for all plan years (beginning with the first plan year to which section 412 applies) over the total credits to such account for such years or, if less, the excess of the total charges to the alternative minimum funding standard account for such plan years over the total credits to such account for such years.
Account required Each plan to which this section applies shall establish and maintain a funding standard account. Such account shall be credited and charged solely as provided in this section.
the amount necessary to amortize each waived funding deficiency (within the meaning of section 412
(c)(3)) for each prior plan year in equal annual installments (until fully amortized) over a period of 5 plan years,
the amount necessary to amortize in equal annual installments (until fully amortized) over a period of 20 years the contributions which would be required to be made under the plan but for the provisions of section 412
(c)(7)(A)(i)(I) (as in effect on the day before the enactment of the Pension Protection Act of 2006).
the amount of the waived funding deficiency (within the meaning of section 412
(c)(3)) for the plan year, and
Combining and offsetting amounts to be amortized Under regulations prescribed by the Secretary, amounts required to be amortized under paragraph (2) or paragraph (3), as the case may be—
In general Except as provided in subparagraph (B), the funding standard account (and items therein) shall be charged or credited (as determined under regulations prescribed by the Secretary) with interest at the appropriate rate consistent with the rate or rates of interest used under the plan to determine costs.
Exception The interest rate used for purposes of computing the amortization charge described in subsection (b)(2)(C) or for purposes of any arrangement under subsection (d) for any plan year shall be the greater of—
Amortization schedules in effect Amortization schedules for amounts described in paragraphs (2) and (3) that are in effect as of the last day of the last plan year beginning before January 1, 2014, by reason of section 104 of the Pension Protection Act of 2006 shall remain in effect pursuant to their terms and this section, except that such amounts shall not be amortized again under this section.
Determinations to be made under funding method For purposes of this section, normal costs, accrued liability, past service liabilities, and experience gains and losses shall be determined under the funding method used to determine costs under the plan.
Valuation of assets (A)
In general For purposes of this section, the value of the plan’s assets shall be determined on the basis of any reasonable actuarial method of valuation which takes into account fair market value and which is permitted under regulations prescribed by the Secretary.
Dedicated bond portfolio The Secretary may by regulations provide that the value of any dedicated bond portfolio of a plan shall be determined by using the interest rate under section 412
(b)(5) (as in effect on the day before the enactment of the Pension Protection Act of 2006).
Actuarial assumptions must be reasonable For purposes of this section, all costs, liabilities, rates of interest, and other factors under the plan shall be determined on the basis of actuarial assumptions and methods—
Treatment of certain changes as experience gain or loss For purposes of this section, if—
a change in the definition of the term “wages” under section 3121 or a change in the amount of such wages taken into account under regulations prescribed for purposes of section 401
Funding method and plan year (A)
Funding methods available All funding methods available to CSEC plans under section 412 (as in effect on the day before the enactment of the Pension Protection Act of 2006) shall continue to be available under this section.
Changes If the funding method for a plan is changed, the new funding method shall become the funding method used to determine costs and liabilities under the plan only if the change is approved by the Secretary. If the plan year for a plan is changed, the new plan year shall become the plan year for the plan only if the change is approved by the Secretary.
Approval required for certain changes in assumptions by certain single-employer plans subject to additional funding requirement (i)
the aggregate unfunded vested benefits as of the close of the preceding plan year (as determined under section 4006(a)(3)(E)(iii) of the Employee Retirement Income Security Act of 1974) of such plan and all other plans maintained by the contributing sponsors (as defined in section 4001(a)(13) of such Act) and members of such sponsors’ controlled groups (as defined in section 4001(a)(14) of such Act) which are covered by title IV [1]
(disregarding plans with no unfunded vested benefits) exceed $50,000,000, and
Full funding If, as of the close of a plan year, a plan would (without regard to this paragraph) have an accumulated funding deficiency (determined without regard to the alternative minimum funding standard account permitted under subsection (e)) in excess of the full funding limitation—
Full-funding limitation For purposes of paragraph (6), the term “full-funding limitation” means the excess (if any) of—
Minimum amount.— (i)
In general.— In no event shall the full-funding limitation determined under subparagraph (A) be less than the excess (if any) of—
Assets.— For purposes of clause (i), assets shall not be reduced by any credit balance in the funding standard account.
Annual valuation (A)
In general For purposes of this section, a determination of experience gains and losses and a valuation of the plan’s liability shall be made not less frequently than once every year, except that such determination shall be made more frequently to the extent required in particular cases under regulations prescribed by the Secretary.
Valuation date (i)
Time when certain contributions deemed made For purposes of this section, any contributions for a plan year made by an employer during the period—
Anticipation of benefit increases effective in the future In determining projected benefits, the funding method of a collectively bargained CSEC plan described in section 413
(a) shall anticipate benefit increases scheduled to take effect during the term of the collective bargaining agreement applicable to the plan.
Extension of amortization periods The period of years required to amortize any unfunded liability (described in any clause of subsection (b)(2)(B)) of any plan may be extended by the Secretary for a period of time (not in excess of 10 years) if the Secretary determines that such extension would carry out the purposes of the Employee Retirement Income Security Act of 1974 and provide adequate protection for participants under the plan and their beneficiaries, and if the Secretary determines that the failure to permit such extension would result in—
Alternative minimum funding standard (1)
In general A CSEC plan which uses a funding method that requires contributions in all years not less than those required under the entry age normal funding method may maintain an alternative minimum funding standard account for any plan year. Such account shall be credited and charged solely as provided in this subsection.
Charges and credits to account For a plan year the alternative minimum funding standard account shall be—
Interest The alternative minimum funding standard account (and items therein) shall be charged or credited with interest in the manner provided under subsection (b)(5) with respect to the funding standard account.
Quarterly contributions required (1)
In general If a CSEC plan which has a funded current liability percentage for the preceding plan year of less than 100 percent fails to pay the full amount of a required installment for the plan year, then the rate of interest charged to the funding standard account under subsection (b)(5) with respect to the amount of the underpayment for the period of the underpayment shall be equal to the greater of—
Amount of underpayment, period of underpayment For purposes of paragraph (1)—
Period of underpayment The period for which interest is charged under this subsection with regard to any portion of the underpayment shall run from the due date for the installment to the date on which such portion is contributed to or under the plan (determined without regard to subsection (c)(9)).
Order of crediting contributions For purposes of subparagraph (A)(ii), contributions shall be credited against unpaid required installments in the order in which such installments are required to be paid.
Number of required installments; due dates For purposes of this subsection—
Payable in 4 installments There shall be 4 required installments for each plan year.
Amount of required installment For purposes of this subsection—
In general The amount of any required installment shall be 25 percent of the required annual payment.
Liquidity requirement (A)
In general A plan to which this paragraph applies shall be treated as failing to pay the full amount of any required installment to the extent that the value of the liquid assets paid in such installment is less than the liquidity shortfall (whether or not such liquidity shortfall exceeds the amount of such installment required to be paid but for this paragraph).
Plans to which paragraph applies This paragraph shall apply to a CSEC plan other than a plan described in section 412
(l)(6)(A) (as in effect on the day before the enactment of the Pension Protection Act of 2006) which—
Period of underpayment For purposes of paragraph (1), any portion of an installment that is treated as not paid under subparagraph (A) shall continue to be treated as unpaid until the close of the quarter in which the due date for such installment occurs.
Limitation on increase If the amount of any required installment is increased by reason of subparagraph (A), in no event shall such increase exceed the amount which, when added to prior installments for the plan year, is necessary to increase the funded current liability percentage (taking into account the expected increase in current liability due to benefits accruing during the plan year) to 100 percent.
Fiscal years and short years (A)
Fiscal years In applying this subsection to a plan year beginning on any date other than January 1, there shall be substituted for the months specified in this subsection, the months which correspond thereto.
Short plan year This subsection shall be applied to plan years of less than 12 months in accordance with regulations prescribed by the Secretary.
In general In the case of a plan to which this section applies, if—
Plans to which subsection applies This subsection shall apply to a CSEC plan for any plan year for which the funded current liability percentage of such plan is less than 100 percent. This subsection shall not apply to any plan to which section 4021 of the Employee Retirement Income Security Act of 1974 does not apply (as such section is in effect on the date of the enactment of the Retirement Protection Act of 1994).
Amount of lien For purposes of paragraph (1), the amount of the lien shall be equal to the aggregate unpaid balance of required installments and other payments required under this section (including interest)—
Notice of failure A person committing a failure described in paragraph (1) shall notify the Pension Benefit Guaranty Corporation of such failure within 10 days of the due date for the required installment or other payment.
Period of lien The lien imposed by paragraph (1) shall arise on the due date for the required installment or other payment and shall continue until the last day of the first plan year in which the plan ceases to be described in paragraph (1)(B). Such lien shall continue to run without regard to whether such plan continues to be described in paragraph (2) during the period referred to in the preceding sentence.
Enforcement Any lien created under paragraph (1) may be perfected and enforced only by the Pension Benefit Guaranty Corporation, or at the direction of the Pension Benefit Guaranty Corporation, by any contributing employer (or any member of the controlled group of the contributing employer).
Due date; required installment The terms “due date” and “required installment” have the meanings given such terms by subsection (f), except that in the case of a payment other than a required installment, the due date shall be the date such payment is required to be made under this section.
Current liability For purposes of this section—
In general The term “current liability” means all liabilities to employees and their beneficiaries under the plan.
Treatment of unpredictable contingent event benefits (A)
In general For purposes of paragraph (1), any unpredictable contingent event benefit shall not be taken into account until the event on which the benefit is contingent occurs.
Unpredictable contingent event benefit The term “unpredictable contingent event benefit” means any benefit contingent on an event other than—
Interest rate and mortality assumptions used (A)
Interest rate The rate of interest used to determine current liability under this section shall be the third segment rate determined under section 430
(h)(2)(C).
Mortality tables (i)
Separate mortality tables for the disabled Notwithstanding subparagraph (B)—
Certain service disregarded (A)
In general In the case of a participant to whom this paragraph applies, only the applicable percentage of the years of service before such individual became a participant shall be taken into account in computing the current liability of the plan.
Applicable percentage For purposes of this subparagraph, the applicable percentage shall be determined as follows:
If the years of participation are: The applicable percentage is: 1
80 5 or more
Participants to whom paragraph applies This subparagraph shall apply to any participant who, at the time of becoming a participant—
Election An employer may elect not to have this subparagraph apply. Such an election, once made, may be revoked only with the consent of the Secretary.
Funded current liability percentage For purposes of this section, the term “funded current liability percentage” means, with respect to any plan year, the percentage which—
Funding restoration status Notwithstanding any other provisions of this section—
Normal cost payment (A)
In general In the case of a CSEC plan that is in funding restoration status for a plan year, for purposes of section 412, the term “accumulated funding deficiency” means, for such plan year, the greater of—
Normal cost In the case of a CSEC plan that uses a spread gain funding method, for purposes of this subsection, the term “normal cost” means normal cost as determined under the entry age normal funding method.
Plan amendments In the case of a CSEC plan that is in funding restoration status for a plan year, no amendment to such plan may take effect during such plan year if such amendment has the effect of increasing liabilities of the plan by means of increases in benefits, establishment of new benefits, changing the rate of benefit accrual, or changing the rate at which benefits become nonforfeitable. This paragraph shall not apply to any plan amendment that is required to comply with any applicable law. This paragraph shall cease to apply with respect to any plan year, effective as of the first day of the plan year (or if later, the effective date of the amendment) upon payment by the plan sponsor of a contribution to the plan (in addition to any contribution required under this section without regard to this paragraph) in an amount equal to the increase in the funding liability of the plan attributable to the plan amendment.
Funding restoration plan The sponsor of a CSEC plan shall establish a written funding restoration plan within 180 days of the receipt by the plan sponsor of a certification from the plan actuary that the plan is in funding restoration status for a plan year. Such funding restoration plan shall consist of actions that are calculated, based on reasonably anticipated experience and reasonable actuarial assumptions, to increase the plan’s funded percentage to 100 percent over a period that is not longer than the greater of 7 years or the shortest amount of time practicable. Such funding restoration plan shall take into account contributions required under this section (without regard to this paragraph). If a plan remains in funding restoration status for 2 or more years, such funding restoration plan shall be updated each year after the 1st such year within 180 days of receipt by the plan sponsor of a certification from the plan actuary that the plan remains in funding restoration status for the plan year.
Annual certification by plan actuary Not later than the 90th day of each plan year of a CSEC plan, the plan actuary shall certify to the plan sponsor whether or not the plan is in funding restoration status for the plan year, based on the plan’s funded percentage as of the beginning of the plan year. For this purpose, the actuary may conclusively rely on an estimate of—
Funding restoration status A CSEC plan shall be treated as in funding restoration status for a plan year if the plan’s funded percentage as of the beginning of such plan year is less than 80 percent.
Funded percentage The term “funded percentage” means the ratio (expressed as a percentage) which—
Funding liability The term “funding liability” for a plan year means the present value of all benefits accrued or earned under the plan as of the beginning of the plan year, based on the assumptions used by the plan pursuant to this section, including the interest rate described in subsection (b)(5)(A) (without regard to subsection (b)(5)(B)).
Spread gain funding method The term “spread gain funding method” has the meaning given such term under rules and forms issued by the Secretary.
Plan sponsor The term “plan sponsor” means, with respect to a CSEC plan, the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the plan.
So in original. Probably should be followed by “of such Act”.
(Added Pub. L. 113–97, title II, § 202(a),Apr. 7, 2014, 128 Stat. 1122.)
Section 412 (as in effect on the day before the enactment of the Pension Protection Act of 2006), referred to in subsecs. (b)(2)(E), (c)(2)(B), (5)(A), and (f)(5)(B), means section 412 of this title as in effect on the day before the enactment of Pub. L. 109–280. Section 111(a) ofPub. L. 109–280generally amended section 412.
Section 104 of the Pension Protection Act of 2006, referred to in subsec. (b)(6), is section 104 ofPub. L. 109–280, which is set out as a note under section 401 of this title.
The Social Security Act, referred to in subsecs. (c)(4)(A) and (h)(3)(C)(ii), is act Aug. 14, 1935, ch. 531, 49 Stat. 620, which is classified generally to chapter 7 (§ 301 et seq.) of Title 42, The Public Health and Welfare. Title II of the Act is classified generally to subchapter II (§ 401 et seq.) of chapter 7 of Title 42. For complete classification of this Act to the Code, see section 1305 of Title 42 and Tables.
The Employee Retirement Income Security Act of 1974, referred to in subsecs. (c)(5)(C)(ii)(II), (d), and (g)(2), (4)(C), is Pub. L. 93–406, Sept. 2, 1974, 88 Stat. 829, which is classified principally to chapter 18 (§ 1001 et seq.) of Title 29, Labor. Title IV of the Act is classified principally to subchapter III (§ 1301 et seq.) of chapter 18 of Title 29. Sections 4001, 4006, 4021, and 4068 of the Act are classified to sections 1301, 1306, 1321, and 1368 of Title 29, respectively. For complete classification of this Act to the Code, see Short Title note set out under section 1001 of Title 29 and Tables.
Section applicable to years beginning after Dec. 31, 2013, see section 3 ofPub. L. 113–97, set out as an Effective Date of 2014 Amendment note under section 401 of this title.