88 STAT. 914 Ante, p. 901. 26 USC 401. Post, pp. 969, 991. 26 USC 405, "Accumulated funding deficiency." Post, p. 920. Pub. Law 93-406 - 86 SEC. 1013. MINIMUM FUNDING STANDARDS. September 2, 1974 (a) IN GENERAL.-Subpart B of part I of subchapter D of chapter 1 is amended by adding after section 411 the following new section: "SEC. 412. MINIMUM FUNDING STANDARDS. "(a) GENERAL RULE.-Except as provided in subsection (h), this section applies to a plan if, for any plan year beginning on or after the effective date of this section for such plan- "(1) such plan included a trust which qualified (or was determined by the Secretary or his delegate to have qualified) under section 401 (a), or "(2) such plan satisfied (or was determined by the Secretary or his delegate to have satisfied) the requirements of section 403 (a) or 405 (a). A plan to which this section applies shall have satisfied the minimuin funding standard for such plan for a plan year if as of the end of such plan year, the plan does not have an accumulated funding deficiency. For purposes of this section and section 4971, the term accumulated funding deficiency' means for any plan the excess of the total charges to the funding standard account for all plan years (beginning with the first plan year to which this section 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. "(b) FUNDING STANDARD ACCOUNT. "(1) 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. "(2) CHARGES TO ACCOUNT.-For a plan year, the funding standard account shall be charged with the sum of "(A) the normal cost of the plan for the plan year, "(B) the amounts necessary to amortize in equal annual installments (until fully amortized) "(i) in the case of a plan in existence on January 1, 1974, the unfunded past service liability under the plan on the first day of the first plan year to which this section applies, over a period of 40 plan years, (ii) in the case of a plan which comes into existence after January 1, 1974, the unfunded past service liability under the plan on the first day of the first plan year to which this section applies, over a period of 30 plan years (40 plan years in the case of a multiemployer plan), "(iii) separately, with respect to each plan year, the net increase (if any) in unfunded past service liability under the plan arising from plan amendments adopted in such year, over a period of 30 plan years (40 plan years in the case of a multiemployer plan), "(iv) separately, with respect to each plan year, the net experience loss (if any) under the plan, over a period of 15 plan years (20 plan years in the case of a multiemployer plan), and (v) separately, with respect to each plan year, the net loss (if any) resulting from changes in actuarial assumptions used under the plan, over a period of 30 plan years, "(C) the amount necessary to amortize each waived funding deficiency (within the meaning of subsection (d)(3)) for each prior plan year in equal annual installments (until fully amortized) over a period of 15 plan years, and September 2, 1974 - 87 Pub. Law 93-406 "(D) the amount necessary to amortize in equal annual installments (until fully amortized) over a period of 5 plan years any amount credited to the funding standard account under paragraph (3) (D). "(3) CREDITS TO ACCOUNT.-For a plan year, the funding standard account shall be credited with the sum of "(A) the amount considered contributed by the employer to or under the plan for the plan year, "(B) the amount necessary to amortize in equal annual installments (until fully amortized) "(i) separately, with respect to each plan year, the net decrease (if any) in unfunded past service liability under the plan arising from plan amendments adopted in such year, over a period of 30 plan years (40 plan years in the case of a multiemployer plan), 66 "(ii) separately, with respect to each plan year, the net experience gain (if any) under the plan, over a period of 15 plan years (20 plan years in the case of a multiemployer plan), and "(iii) separately, with respect to each plan year, the net gain (if any) resulting from changes in actuarial assumptions used under the plan, over a period of 30 plan years, "(C) the amount of the waived funding deficiency (within the meaning of subsection (d) (3) for the plan year, and "(D) in the case of a plan year for which the accumulated funding deficiency is determined under the funding standard account if such plan year follows a plan year for which such deficiency was determined under the alternative minimum funding standard, the excess (if any) of any debit balance in the funding standard account (determined without regard to this subparagraph) over any debit balance in the alternative minimum funding standard account. "(4) COMBINING AND OFFSETTING AMOUNTS TO BE AMORTIZED.— Under regulations prescribed by the Secretary or his delegate, amounts required to be amortized under paragraph (2) or paragraph (3), as the case may be "A) may be combined into one amount under such paragraph to be amortized over a period determined on the basis of the remaining amortization period for all items entering into such combined amount, and "(B) may be offset against amounts required to be amortized under the other such paragraph, with the resulting amount to be amortized over a period determined on the basis of the remaining amortization periods for all items entering into whichever of the two amounts being offset is the greater. “(5) INTEREST.-The funding standard account (and items therein) shall be charged or credited (as determined under regulations prescribed by the Secretary or his delegate) with interest at the appropriate rate consistent with the rate or rates of interest used under the plan to determine costs. "(c) SPECIAL RULES.— "(1) 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. 88 STAT. 915 88 STAT. 916 42 USC 1305. 26 USC 3121. 26 USC 401. Pub. Law 93-406 88. September 2, 1974 "(2) 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 or his delegate. (B) ELECTION WITH RESPECT TO BONDS.-The value of a bond or other evidence of indebtedness which is not in default as to principal or interest may, at the election of the plan administrator, be determined on an amortized basis running from initial cost at purchase to par value at maturity or earliest call date. Any election under this subparagraph shall be made at such time and in such manner as the Secretary or his delegate shall by regulations provide, shall apply to all such evidences of indebtedness, and may be revoked only with the consent of the Secretary or his delegate. "(3) 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 which, in the aggregate, are reasonable (taking into account the experience of the plan and reasonable expectations) and which, in combination, offer the actuary's best estimate of anticipated experience under the plan. "(4) TREATMENT OF CERTAIN CHANGES AS EXPERIENCE GAIN OR LOSS. For purposes of this section, if "(A) a change in benefits under the Social Security Act or in other retirement benefits created under Federal or State law, or "(B) 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 (a) (5), results in an increase or decrease in accrued liability under a plan, such increase or decrease shall be treated as an experience loss or gain. "(5) CHANGE IN FUNDING METHOD OR IN PLAN YEAR REQUIRES APPROVAL. 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 or his delegate. 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 or his delegate. "(6) 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 (g)) in excess of the full funding limitation "(A) the funding standard account shall be credited with the amount of such excess, and "(B) all amounts described in paragraphs (2) (B), (C), and (D) and (3) (B) of subsection (b) which are required to be amortized shall be considered fully amortized for purposes of such paragraphs. "(7) FULL FUNDING LIMITATION.-For purposes of paragraph September 2, 1974 89 Pub. Law 93-406 88 STAT. 917 (6), the term 'full funding limitation' means the excess (if any) of "(A) the accrued liability (including normal cost) under the plan (determined under the entry age normal funding method if such accrued liability cannot be directly calculated under the funding method used for the plan), over "(B) the lesser of the fair market value of the plan's assets or the value of such assets determined under paragraph (2). "(8) CERTAIN RETROACTIVE PLAN AMENDMENTS.-For purposes of this section, any amendment applying to a plan year which— "(A) is adopted after the close of such plan year but no later than 2 and one-half months after the close of the plan year (or, in the case of a multiemployer plan, no later than 2 years after the close of such plan year), "(B) does not reduce the accrued benefit of any participant determined as of the beginning of the first plan year to which the amendment applies, and "(C) does not reduce the accrued benefit of any participant determined as of the time of adoption except to the extent required by the circumstances, shall, at the election of the plan administrator, be deemed to have been made on the first day of such plan year. No amendment Notification described in this paragraph which reduces the accrued benefits of amendment. of any participant shall take effect unless the plan administrator files a notice with the Secretary of Labor notifying him of such amendment and the Secretary of Labor has approved such amendment, or within 90 days after the date on which such notice was filed, failed to disapprove such amendment. No Approval. amendment described in this subsection shall be approved by the Secretary of Labor unless he determines that such amendment is necessary because of a substantial business hardship (as determined under subsection (d) (2)) and that a waiver under subsection (d) (1) is unavailable or inadequate. "(9) 3-YEAR VALUATION.-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 3 years, except that such determination shall be made more frequently to the extent required in particular cases under regulations prescribed by the Secretary or his delegate. "(10) TIME WHEN CERTAIN CONTRIBUTIONS DEEMED MADE.— For purposes of this section, any contributions for a plan year made by an employer after the last day of such plan year, but not later than two and one-half months after such day, shall be deemed to have been made on such last day. For purposes of this paragraph, such two and one-half month period may be extended for not more than six months under regulations prescribed by the Secretary or his delegate. "(d) VARIANCE FROM MINIMUM FUNDING STANDARD.— "(1) WAIVER IN CASE OF SUBSTANTIAL BUSINESS HARDSHIP.— If a employer or in the case of a multiemployer plan, 10 percent or more of the number of employers contributing to or under the plan, are unable to satisfy the minimum funding standard for a plan year without substantial business hardship and if appliIcation of the standard would be adverse to the interests of plan participants in the aggregate, the Secretary or his delegate may waive the requirements of subsection (a) for such year with respect to all or any portion of the minimum funding standard other than the portion thereof determined under subsection (b) (2) (C). The Secretary or his delegate shall not waive the mini Pub. Law 93-406 88 STAT. 918 Ante, p. 829. mum funding standard with respect to a plan for more than 5 of any 15 consecutive plan years. "(2) DETERMINATION OF SUBSTANTIAL BUSINESS HARDSHIP.— For purposes of this section, the factors taken into account in determining substantial business hardship shall include (but shall not be limited to) whether or not "(A) the employer is operating at an economic loss, "(B) there is substantial unemployment or underemployment in the trade or business and in the industry concerned, "(C) the sales and profits of the industry concerned are depressed or declining, and "(D) it is reasonable to expect that the plan will be continued only if the waiver is granted. "(3) WAIVED FUNDING DEFICIENCY.-For purposes of this section, the term 'waived funding deficiency' means the portion of the minimum funding standard (determined without regard to subsection (b) (3) (C)) for a plan year waived by the Secretary or his delegate and not satisfied by employer contributions. "(e) 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 of Labor for a period of time (not in excess of 10 years) if he determines that such extension would carry out the purposes of the Employee Retirement Income Security Act of 1974 and would provide adequate protection for participants under the plan and their beneficiaries and if he determines that the failure to permit such extension would "(1) result in "(A) a substantial risk to the voluntary continuation of the plan, or "(B) a substantial curtailment of pension benefit levels or employee compensation, and "(2) be adverse to the interests of plan participants in the aggregate. "(f) BENEFITS MAY NOT BE INCREASED DURING WAIVER OR EXTENSION PERIOD.— "(1) IN GENERAL.-No amendment of the plan which increases the liabilities of the plan by reason of any increase in benefits, any change in the accrual of benefits, or any change in the rate at which benefits become nonforfeitable under the plan shall be adopted if a waiver under subsection (d) (1) or an extension of time under subsection (e) is in effect with respect to the plan, or if a plan amendment described in subsection (c) (8) has been made at any time in the preceding 12 months (24 months for multiemployer plans). If a plan is amended in violation of the preceding sentence, any such waiver or extension of time shall not apply to any plan year ending on or after the date on which such amendment is adopted. "(2) EXCEPTION.-Paragraph (1) shall not apply to any plan amendment which "(A) the Secretary of Labor determines to be reasonable and which provides for only de minimis increases in the liabilities of the plan, "(B) only repeals an amendment described in subsection (c) (8), or "(C) is required as a condition of qualification under this part. |