§ 436.
Funding-based limits on benefits and benefit accruals under single-employer plans
(b)
Funding-based limitation on shutdown benefits and other unpredictable contingent event benefits under single-employer plans
(1)
In general
If a participant of a defined benefit plan which is a single-employer plan is entitled to an unpredictable contingent event benefit payable with respect to any event occurring during any plan year, the plan shall provide that such benefit may not be provided if the adjusted funding target attainment percentage for such plan year—
(A)
is less than 60 percent, or
(B)
would be less than 60 percent taking into account such occurrence.
(2)
Exemption
Paragraph (1) shall cease to apply with respect to any plan year, effective as of the first day of the plan year, upon payment by the plan sponsor of a contribution (in addition to any minimum required contribution under section 430) equal to—
(A)
in the case of paragraph (1)(A), the amount of the increase in the funding target of the plan (under section 430) for the plan year attributable to the occurrence referred to in paragraph (1), and
(B)
in the case of paragraph (1)(B), the amount sufficient to result in an adjusted funding target attainment percentage of 60 percent.
(3)
Unpredictable contingent event benefit
For purposes of this subsection, the term “unpredictable contingent event benefit” means any benefit payable solely by reason of—
(A)
a plant shutdown (or similar event, as determined by the Secretary), or
(B)
an event other than the attainment of any age, performance of any service, receipt or derivation of any compensation, or occurrence of death or disability.
(c)
Limitations on plan amendments increasing liability for benefits
(1)
In general
No amendment to a defined benefit plan which is a single-employer plan which has the effect of increasing liabilities of the plan by reason of increases in benefits, establishment of new benefits, changing the rate of benefit accrual, or changing the rate at which benefits become nonforfeitable may take effect during any plan year if the adjusted funding target attainment percentage for such plan year is—
(A)
less than 80 percent, or
(B)
would be less than 80 percent taking into account such amendment.
(2)
Exemption
Paragraph (1) 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 (in addition to any minimum required contribution under section 430) equal to—
(A)
in the case of paragraph (1)(A), the amount of the increase in the funding target of the plan (under section 430) for the plan year attributable to the amendment, and
(B)
in the case of paragraph (1)(B), the amount sufficient to result in an adjusted funding target attainment percentage of 80 percent.
(3)
Exception for certain benefit increases
(d)
Limitations on accelerated benefit distributions
(1)
Funding percentage less than 60 percent
(3)
Limited payment if percentage at least 60 percent but less than 80 percent
(A)
In general
A defined benefit plan which is a single-employer plan shall provide that, in any case in which the plan’s adjusted funding target attainment percentage for a plan year is 60 percent or greater but less than 80 percent, the plan may not pay any prohibited payment after the valuation date for the plan year to the extent the amount of the payment exceeds the lesser of—
(i)
50 percent of the amount of the payment which could be made without regard to this section, or
(ii)
the present value (determined under guidance prescribed by the Pension Benefit Guaranty Corporation, using the interest and mortality assumptions under section 417(e)) of the maximum guarantee with respect to the participant under section 4022 of the Employee Retirement Income Security Act of 1974.
(B)
One-time application
(ii)
Treatment of beneficiaries
(5)
Prohibited payment
For purpose of this subsection, the term “prohibited payment” means—
(A)
any payment, in excess of the monthly amount paid under a single life annuity (plus any social security supplements described in the last sentence of section 411(a)(9)), to a participant or beneficiary whose annuity starting date (as defined in section 417(f)(2)) occurs during any period a limitation under paragraph (1) or (2) is in effect,
(B)
any payment for the purchase of an irrevocable commitment from an insurer to pay benefits, and
(C)
any other payment specified by the Secretary by regulations.
Such term shall not include the payment of a benefit which under section 411(a)(11) may be immediately distributed without the consent of the participant.
(f)
Rules relating to contributions required to avoid benefit limitations
(1)
Security may be provided
(B)
Form of security
The security required under subparagraph (A) shall consist of—
(i)
a bond issued by a corporate surety company that is an acceptable surety for purposes of section 412 of the Employee Retirement Income Security Act of 1974,
(ii)
cash, or United States obligations which mature in 3 years or less, held in escrow by a bank or similar financial institution, or
(iii)
such other form of security as is satisfactory to the Secretary and the parties involved.
(C)
Enforcement
Any security provided under subparagraph (A) may be perfected and enforced at any time after the earlier of—
(i)
the date on which the plan terminates,
(ii)
if there is a failure to make a payment of the minimum required contribution for any plan year beginning after the security is provided, the due date for the payment under section 430(j), or
(iii)
if the adjusted funding target attainment percentage is less than 60 percent for a consecutive period of 7 years, the valuation date for the last year in the period.
(2)
Prefunding balance or funding standard carryover balance may not be used
(3)
Deemed reduction of funding balances
(B)
Exception for insufficient funding balances
(C)
Restrictions of certain rules to collectively bargained plans
(h)
Presumed underfunding for purposes of benefit limitations
(1)
Presumption of continued underfunding
(2)
Presumption of underfunding after 10th month
(3)
Presumption of underfunding after 4th month for nearly underfunded plans
In any case in which—
(A)
a benefit limitation under subsection (b), (c), (d), or (e) did not apply to a plan with respect to the plan year preceding the current plan year, but the adjusted funding target attainment percentage of the plan for such preceding plan year was not more than 10 percentage points greater than the percentage which would have caused such subsection to apply to the plan with respect to such preceding plan year, and
(B)
as of the first day of the 4th month of the current plan year, the enrolled actuary of the plan has not certified the actual adjusted funding target attainment percentage of the plan for the current plan year,
until the enrolled actuary so certifies, such first day shall be deemed, for purposes of such subsection, to be the valuation date of the plan for the current plan year and the adjusted funding target attainment percentage of the plan as of such first day shall, for purposes of such subsection, be presumed to be equal to 10 percentage points less than the adjusted funding target attainment percentage of the plan for such preceding plan year.
(i)
Treatment of plan as of close of prohibited or cessation period
For purposes of applying this title—
(1)
Operation of plan after period
(2)
Treatment of affected benefits
(j)
Terms relating to funding target attainment percentage
For purposes of this section—
(2)
Adjusted funding target attainment percentage
(3)
Application to plans which are fully funded without regard to reductions for funding balances
(Added [Pub. L. 109–280, title I, § 113(a)(1)(B)], Aug. 17, 2006, [120 Stat. 847]; amended [Pub. L. 110–458, title I, § 101(c)(2)], Dec. 23, 2008, [122 Stat. 5097]; [Pub. L. 111–192, title II, § 203(a)(2)], June 25, 2010, [124 Stat. 1300]; [Pub. L. 113–97, title II, § 202(c)(3)(B)], Apr. 7, 2014, [128 Stat. 1136]; [Pub. L. 113–159, title II, § 2003(c)(1)], Aug. 8, 2014, [128 Stat. 1850]; [Pub. L. 113–295, div. A, title II, § 221(a)(57)(E)(i)], (F)(i), (G)(i), Dec. 19, 2014, [128 Stat. 4046].)