September 2, 1974 - 91 Pub. Law 93-406 "(g) ALTERNATIVE MINIMUM FUNDING STANDARD.— "(1) IN GENERAL-A 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. "(2) CHARGES AND CREDITS TO ACCOUNT.-For a plan year the alternative minimum funding standard account shall be "(A) charged with the sum of— "(i) the lesser of normal cost under the funding method used under the plan or normal cost determined under the unit credit method, "(ii) the excess, if any, of the present value of accrued benefits under the plan over the fair market value of the assets, and "(iii) an amount equal to the excess (if any) of credits to the alternative minimum standard account for all prior plan years over charges to such account for all such years, and "(B) credited with the amount considered contributed by the employer to or under the plan for the plan year. "(3) SPECIAL RULES.-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. "(h) EXCEPTIONS.-This section shall not apply to— "(1) any profit-sharing or stock bonus plan, "(2) any insurance contract plan described in subsection (i), "(3) any governmental plan (within the meaning of section 414(d)), 88 STAT. 919 Post, p. 925. "(4) any church plan (within the meaning of section 414(e)) with respect to which the election provided by section 410(d) Ante, p. 898. has not been made, "(5) any plan which has not, at any time after the date of the enactment of the Employee Retirement Income Security Act of 1974, provided for employer contributions, or Ante, p. 829. "(6) any plan established and maintained by a society, order, or association described in section 501 (c) (8) or (9), if no part of 26 USC 501. the contributions to or under such plan are made by employers of participants in such plan. No plan described in paragraph (3), (4), or (6) shall be treated as a qualified plan for purposes of section 401(a) unless such plan meets the requirements of section 401(a) (7) as in effect on the day before the date of the enactment of the Employee Retirement Income Security Act of 1974. "(i) CERTAIN INSURANCE CONTRACT PLANS.-A plan is described in this subsection if- "(1) the plan is funded exclusively by the purchase of individual insurance contracts, "(2) such contracts provide for level annual premium payments to be paid extending not later than the retirement age for each individual participating in the plan, and commencing with the date the individual became a participant in the plan (or, in the case of an increase in benefits, commencing at the time such increase becomes effective), 88 STAT. 920 26 USC 4041, 4940. Ante, p. 914. 26 USC 6212. Pub. Law 93-406 - 92. September 2, 1974 "(3) benefits provided by the plan are equal to the benefits provided under each contract at normal retirement age under the plan and are guaranteed by an insurance carrier (licensed under the laws of a State to do business with the plan) to the extent premiums have been paid, "(4) premiums payable for the plan year, and all prior plan years, under such contracts have been paid before lapse or there is reinstatement of the policy, "(5) no rights under such contracts have been subject to a security interest at any time during the plan year, and ་་ "(6) no policy loans are outstanding at any time during the plan year. A plan funded exclusively by the purchase of group insurance contracts which is determined under regulations prescribed by the Secretary or his delegate to have the same characteristics as contracts described in the preceding sentence shall be treated as a plan described in this subsection." (b) EXCISE TAX ON FAILURE TO MEET MINIMUM FUNDING STANDARDS. Subtitle D (relating to miscellaneous excise taxes) is amended by adding at the end thereof the following new chapter: "CHAPTER 43-QUALIFIED PENSION, ETC., PLANS "Sec. 4971. Taxes on failure to meet minimum funding standards. "SEC. 4971. TAXES ON FAILURE TO MEET MINIMUM FUNDING STANDARDS. "(a) INITIAL TAX.-For each taxable year of an employer who maintains a plan to which section 412 applies, there is hereby imposed a tax of 5 percent on the amount of the accumulated funding deficiency under the plan, determined as of the end of the plan year ending with or within such taxable year. The tax imposed by this subsection shall be paid by the employer responsible for contributing to or under the plan the amount described in section 412(b) (3) (A). "(b) ADDITIONAL TAX.--In any case in which an initial tax is imposed by subsection (a) on an accumulated funding deficiency and such accumulated funding deficiency is not corrected within the correction period, there is hereby imposed a tax equal to 100 percent of such accumulated funding deficiency to the extent not corrected. The tax imposed by this subsection shall be paid by the employer described in subsection (a). "(c) DEFINITIONS.--For purposes of this section "(1) ACCUMULATED FUNDING DEFICIENCY.-The term 'accumulated funding deficiency' has the meaning given to such term by the last sentence of section 412 (a). "(2) CORRECT. The term 'correct' means, with respect to an accumulated funding deficiency, the contribution, to or under the plan, of the amount necessary to reduce such accumulated funding deficiency as of the end of a plan year in which such deficiency arose to zero. "(3) CORRECTION PERIOD.-The term 'correction period' means, with respect to an accumulated funding deficiency, the period beginning with the end of a plan year in which there is an accumulated funding deficiency and ending 90 days after the date of mailing of a notice of deficiency under section 6212 with respect to the tax imposed by subsection (b), extended- "(A) by any period in which a deficiency cannot be assessed under section 6213 (a), and September 2, 1974 - 93 Pub. Law 93-406 "(B) by any other period which the Secretary or his delegate determines is reasonable and necessary to permit a reduction of the accumulated funding deficiency to zero under this section. "(d) NOTIFICATION OF THE SECRETARY OF LABOR.-Before issuing a notice of deficiency with respect to the tax imposed by subsection (a) or (b), the Secretary or his delegate shall notify the Secretary of Labor and provide him a reasonable opportunity (but not more than 60 days) "(1) to require the employer responsible for contributing to or under the plan to eliminate the accumulated funding deficiency, or "(2) to comment on the imposition of such tax. "(e) CROSS REFERENCES.— "For disallowance of deduction for taxes paid under this section, see section 275. "For liability for tax in case of an employer party to collective bargaining agreement, see section 413(b)(6). "For provisions concerning notification of Secretary of Labor of imposition of tax under this section, waiver of the tax imposed by subsection (b), and other coordination between Secretary of the Treasury and Secretary of Labor with respect to compliance with this section, see section 3002(b) of title III of the Employee Retirement Income Security Act of 1974.". (c) AMENDMENTS TO SECTION 404.— 88 STAT. 921 (1) Paragraph (1) of section 404 (a) (relating to deduction for 26 USC 404. employer contributions to pension trusts) is amended to read as follows: "(1) PENSION TRUSTS. "(A) IN GENERAL.-In the taxable year when paid, if the contributions are paid into a pension trust, and if such taxable year ends within or with a taxable year of the trust for which the trust is exempt under section 501 (a), in an amount determined as follows: "(i) the amount necessary to satisfy the minimum funding standard provided by section 412(a) for plan Ante, p. 914. years ending within or with such taxable year (or for any prior plan year), if such amount is greater than the amount determined under clause (ii) or (iii) (whichever is applicable with respect to the plan), "(ii) the amount necessary to provide with respect to all of the employees under the trust the remaining unfunded cost of their past and current service credits distributed as a level amount, or a level percentage of compensation, over the remaining future service of each such employee, as determined under regulations prescribed by the Secretary or his delegate, but if such remaining unfunded cost with respect to any 3 individuals is more than 50 percent of such remaining unfunded cost, the amount of such unfunded cost attributable to such individuals shall be distributed over a period of at least 5 taxable years. "(iii) an amount equal to the normal cost of the plan, In determining the amount deductible in such year under the Pub. Law 93-406 88 STAT. 922 Ante, p. 914. 26 USC 167. 42 USC 401. "Controlled group." 26 USC 1563. section 412, and the maximum amount deductible for such year shall be an amount equal to the full funding limitation for such year determined under section 412. "(B) SPECIAL RULE IN CASE OF CERTAIN AMENDMENTS.—In the case of a plan which the Secretary of Labor finds to be collectively bargained which makes an election under this subparagraph (in such manner and at such time as may be provided under regulations prescribed by the Secretary or his delegate), if the full funding limitation determined under section 412 (c) (7) for such year is zero, if as a result of any plan amendment applying to such plan year, the amount determined under section 412 (c) (7) (B) exceeds the amount determined under section 412 (c) (7) (A), and if the funding method and the actuarial assumptions used are those used for such year under section 412, the maximum amount deductible in such year under the limitations of this paragraph shall be an amount equal to the lesser of- 12 888 "(i) the full funding limitation for such year determined by applying section 412(c) (7) but increasing the amount referred to in subparagraph (A) thereof by the decrease in the present value of all unamortized liabilities resulting from such amendment, or "(ii) the normal cost under the plan reduced by the amount necessary to amortize in equal annual installments over 10 years (until fully amortized) the decrease described in clause (i). In the case of any election under this subparagraph, the amount deductible under the limitations of this paragraph with respect to any of the plan years following the plan year for which such election was made shall be determined as provided under such regulations as may be prescribed by the Secretary or his delegate to carry out the purposes of this subparagraph. "(C) CERTAIN COLLECTIVELY-BARGAINED PLANS.-In the case of a plan which the Secretary of Labor finds to be collectively bargained, established or maintained by an employer doing business in not less than 40 States and engaged in the trade or business of furnishing or selling services described in section 167(1) (3) (A) (iii), with respect to which the rates have been established or approved by a State or political subdivision thereof, by any agency or instrumentality of the United States, or by a public service or public utility commission or other similar body of any State or political subdivision thereof, and in the case of any employer which is a member of a controlled group with such employer, subparagraph (B) shall be applied by substituting for the words 'plan amendment' the words 'plan amendment or increase in benefits payable under title II of the Social Security Act'. For purposes of this subparagraph, the term 'controlled group' has the meaning provided by section 1563 (a), determined without regard to section 1563 (a) (4) and (e) (3) (C). "(D) CARRYOVER.-Any amount paid in a taxable year in excess of the amount deductible in such year under the foregoing limitations shall be deductible in the succeeding taxable years in order of time to the extent of the difference between the amount paid and deductible in each such succeeding year and the maximum amount deductible for such year under the foregoing limitations." September 2, 1974 - 95 Pub. Law 93-406 88 STAT. 923 (2) Paragraph (6) of section 404 (a) (relating to taxpayers 26 USC 404. on accrual basis) is amended to read as follows: "(6) TIME WHEN CONTRIBUTIONS DEEMED MADE.-For purposes of paragraphs (1), (2), and (3), a taxpayer shall be deemed to have made a payment on the last day of the preceding taxable year if the payment is on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof).” (3) Paragraph (7) of section 404(a) (relating to limit on Supra. deductions) is amended to read as follows: "(7) LIMIT ON DEDUCTIONS.-If amounts are deductible under paragraphs (1) and (3), or (2) and (3), or (1), (2), and (3), in connection with two or more trusts, or one or more trusts and an annuity plan, the total amount deductible in a taxable year under such trusts and plans shall not exceed the greater of 25 percent of the compensation otherwise paid or accrued during the taxable year to the beneficiaries of the trusts or plans, or the amount of contributions made to or under the trusts or plans to the extent such contributions do not exceed the amount of employer contributions necessary to satisfy the minimum funding standard provided by section 412 for the plan year which ends with or Ante, p. 914. within such taxable year (or for any prior plan year). In addition, any amount paid into such trust or under such annuity plans in any taxable year in excess of the amount allowable with respect to such year under the preceding provisions of this paragraph shall be deductible in the succeeding taxable years in order of time, but the amount so deductible under this sentence in any one such succeeding taxable year together with the amount allowable under the first sentence of this paragraph shall not exceed 25 percent of the compensation otherwise paid or accrued during such taxable years to the beneficiaries under the trusts or plans. This paragraph shall not have the effect of reducing the amount otherwise deductible under paragraphs (1), (2), and (3), if no employee is a beneficiary under more than one trust or a trust and an annuity plan." (d) ALTERNATIVE AMORTIZATION METHOD FOR CERTAIN MULTI- 26 USC 412 EMPLOYER PLANS. note. (1) GENERAL RULE.— -In the case of any multiemployer plan (as defined in section 414(f) of the Internal Revenue Code of 1954) Post, p. 925. to which section 412 of such Code applies, if— (A) on January 1, 1974, the contributions under the plan Ante, p. 914. were based on a percentage of pay, (B) the actuarial assumptions with respect to pay are reasonably related to past and projected experience, and (C) the rates of interest under the plan are determined on the basis of reasonable actuarial assumptions, the plan may elect (in such manner and at such time as may be provided under regulations prescribed by the Secretary of the Treasury or his delegate) to fund the unfunded past service liability under the plan existing as of the date 12 months following the first date on which such section 412 first applies to the plan by charging the funding standard account with an equal annual percentage of the aggregate pay of all participants in the plan in lieu of the level dollar charges to such account required under clauses (i), (ii), and (iii) of section 412(b) (2) (B) of such Code and section 302(b) (2) (B) (i), (ii), and (iii) of this Act. (2) LIMITATION.-In the case of a plan which makes an election under paragraph (1), the aggregate of the charges required under such paragraph for a plan year shall not be less than the interest |