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[88 STAT.

unless such employee was separated from the service before the date referred to in subparagraph (A) or (B), whichever is applicable. (b)(1) Except as otherwise provided in paragraphs (2), (3), and (4), all years of service with the employer or employers maintaining the plan shall be taken into account in computing the period of service for purposes of subsection (a)(1). (2) I n the case of any employee who has any 1-year break in service (as defined in section 2 0 3 (b)(3)(A)) under the plan to which the service requirements of clause (i) of subsection (a)(1)(B) apply, if such employee has not satisfied such requirements, service before such break shall not be required to be taken into account. (3) I n computing an employee's period of service for purposes of subsection (a)(1) in the case of any participant who has any 1-year break in service (as defined in section 203(b)(3)(A)), service before such break shall not be required to be taken into account under the plan until he has completed a year of service (as defined in subsection (a)(3)) after his return. (4) In the case of an employee who does not have any nonforfeitable right to an accrued benefit derived from employer contributions, years of service with the employer or employers maintaining the plan before a break in service shall not be required to be taken into account in computing the period of service for purposes of subsection (a)(1) if the number of consecutive 1 -year breaks in service equals or exceeds the aggregate number of such years of service before such break. Such aggregate number of years of service before such break shall be deemed not to include any years of service not required to be taken into account under this paragraph by reason of any prior break in service. MINIMUM

29 USC 1053.

VESTIISTG STANDARDS

gj,^_ 203. (a) Each pension plan shall provide that an employee's right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age and in addition shall satisfy the requirements of paragraphs (1) and (2) of this subsection. (1) A plan satisfies the requirements of this paragraph if an employee's rights in his accrued benefit derived from his own contributions are nonforfeitable. (2) A plan satisfies the requirements of this paragraph if it satisfies the requirements of subparagraph (A), (B), o r (C). (A) A plan satisfies the requirements of this subparagraph if an employee who has at least 10 years of service has a nonforfeitable right to 100 percent of his accrued benefit derived from employer contributions. (B) A plan satisfies the requirements of this subparagraph if an employee who has completed at least 5 years of service has a nonforfeitable right to a percentage of his accrued benefit derived from employer contributions which percentage is not less than the percentage determined under the following table: ^

J,

.

Years of service: 5 6

7 8 9 10 11 12 13 14 15 or more

Nonforfeitable

percentage 25

80

35 40 45 50 60 70 80 90 100.

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85:

(C)(i) A plan satisfies the requirements of this subparagraph if a participant who is not separated from the service, who has completed at least 5 years of service, and with respect to whom the sum of his age and years of service equals or exceeds 45, has a nonforfeitable right to a percentage of his accrued benefit derived from employer contributions determined under the following table: If years of service equal or exceed— 5 6 7 8 9 10

and sum of age and service equals or exceeds— 45 47 49 — _ 51 53 55

then the nonforfeitable percentage is— 50 60 70 80 90 100.

(ii) Notwithstanding clause (i), a plan shall not be treated as satisfying the requirements of this subparagraph unless any participant who has completed at least 10 years of service has a nonforfeitable right to not less than 50 percent of his accrued benefit derived from employer contributions and to not less than an additional 10 percent for each additional year of service thereafter. (3)(A) A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that it is not payable if the participant dies (except in the case of a survivor annuity which is payable as provided in section 205). (B) A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that the payment of benefits is suspended for such period as the employee is employed, subsequent to the commencement of payment of such benefits— (i) in the case of a plan other than a multiemployer plan, by an employer who maintains the plan under which such benefits were being paid; and (ii) in the case of a multiemployer plan, in the same industry, in the same trade or craft, and the same geographic area covered by the plan, as when such benefits commenced. The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subparagraph, including regulations with respect to the meaning of the term "employed". (C) A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because plan amendments may be given retroactive application as provided in section 302(c)(8). (D)(i) A right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that, in the case of a participant who does not have a nonforfeitable right to at least 50 percent of his accrued benefit derived from employer contributions, such accrued benefit may be forfeited on account of the withdrawal by the participant of any amount attributable to the benefit derived from mandatory contributions (as defined in the last sentence of section 204(c)(2)(C)) made by such participant. (ii) Clause (i) shall not apply to a plan unless the plan provides that any accrued benefit forfeited under a plan provision described in such clause shall be restored upon repayment by the participant of the full amount of the withdrawal described in such clause plus, in the case of a defined benefit plan, interest. Such interest shall be computed on such amount at the rate determined for purposes of section 204(c)(2)(C) (if such subsection applies) on the date of such

Regulations.

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license: Creative Commons - Attribution Share-Alike - https://creativecommons.org/licenses/by-sa/4.0/


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Regulations.

PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

repayment (computed annually from the date of such withdrawal). I n the case of a defined contribution plan the plan provision required under this clause may provide that such repayment must be made before the participant has any 1-year break in service commencing after the withdrawal. (iii) I n the case of accrued benefits derived from employer contributions which accrued before the date of the enactment of this Act, a right to such accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that an amount of such accrued benefit may be forfeited on account of the withdrawal by the participant of an amount attributable to the benefit derived from mandatory contributions, made by such participant before the date of the enactment of this Act if such amount forfeited is proportional to such amount withdrawn. This clause shall not apply to any plan to which any mandatory contribution is made after the date of the enactment of this Act. The Secretary of the Treasury shall prescribe such regulations as may be necessary to carry out the purposes of this clause. (iv) For purposes of this subparagraph, in the case of any class-year plan, a withdrawal of employee contributions shall be treated as a withdrawal of such contributions on a plan year by plan year basis in succeeding order of time. (v) CROSS REFERENCE.—

'Year of serv-

'Hour of serv-

For nonforfeitably where the employee has a nonforfeitable right to at least 50 percent of his accrued benefit, see section 206(c). (b)(1) In computing the period of service under the plan for purposes of determining the nonforfeitable percentage under subsection (a)(2), all of an employee's years of service with the employer or employers maintaining the plan shall be taken into account, except that the following may be disregarded: (A) years of service before age 22, except that in the case of a plan which does not satisfy subparagraph (A) or (B) of subsection (a)(2), the plan may not disregard any such year of service during which the employee was a participant; (B) years of service during a period for which the employee declined to contribute to a plan requiring employee contributions, (C) years of service with an employer during any period for which the employer did not maintain the plan or a predecessor plan, defined by the Secretary of the Treasury; (D) service not required to be taken into account under paragraph (3); (E) years of service before January 1, 1971, unless the employee has had at least 3 years of service after December 31, 1970; and (F) years of service before this part first applies to the plan if such service would have been disregarded under the rules of the plan with regard to breaks in service, as in effect on the applicable date. (2)(A) For purposes of this section, except as provided in subparagraph (C), the term "year of service" means a calendar year, plan year, or other 12-consecutive month period designated by the plan (and not prohibited under regulations prescribed by the Secretary) during which the participant has completed 1,000 hours of service. (BJ For purposes of this section, the term "hour of service" has the meaning provided by section 202(a)(3)(C). (C) I n the case of any seasonal industry where the customary period of employment is less than 1,000 hours during a calendar year, the term "year of service" shall be such period as determined under regulations of the Secretary.

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(D) For purposes of this section, in the case of any maritime industry, 125 days of service shall be treated as 1,000 hours of service. The Regulations. Secretary may prescribe regulations to carry out the purposes of this subparagraph. (3)(A) For purposes of this paragraph, the term "1-year break in. "i-year break service" means a calendar year, plan year, or other 12-consecutivemonth period designated by the plan (and not prohibited under regulations prescribed by the Secretary) during which the participant has not completed more than 500 hours of service. (B) For purposes of paragraph (1), in the case of any employee who has any 1-year break in service, years of service before such break shall not be required to be taken into account until he has completed a year of service after his return. (C) For purposes of paragraph (1), in the case of any participant in an individual account plan or an insured defined benefit plan which satisfies the requirements of subsection 2 0 4 (b)(1)(F) who has any 1-year break in service, years of service after such break shall not be required to be taken into account for purposes of determining the nonforfeitable percentage of his accrued benefit derived from employer contributions which accrued before such break. (D) For purposes of paragraph (1), in the case of a participant who, under the plan, does not have any nonforfeitable right to an accrued benefit derived from employer contributions, years of service before any 1-year break in service shall not be required to be taken into account if the number of consecutive 1-year breaks in service equals or exceeds the aggregate number of such years of service prior to such break. Such aggregate number of years of service before such break shall be deemed not to include any years of service not required to be taken into account under this subparagraph by reason of any prior break in service. (4) CROSS KEFEREXCES.—

(A) For definitions of "accrued benefit" and "normal retirement age", see sections 3 (23) and (24). (B) For effect of certain cash out distributions, see section 204(d)(1). (c)(1)(A) A plan amendment changing any vesting schedule under the plan shall be treated as not satisfying the requirements of subsection (a)(2) if the nonforfeitable percentage of the accrued benefit derived from employer contributions (determined as of the later of the date such amendment is adopted, or the date such amendment becomes effective) of any employee who is a participant in the plan is less than such nonforfeitable percentage computed under the plan without regard to such amendment. (B) A plan amendment changing any vesting schedide under the plan shall be treated as not satisfying the requirements of subsection (a)(2) unless each participant having not less than 5 years of service is permitted to elect, within a reasonable period after adoption of such amendment, to have his nonforfeitable percentage computed under the plan without regard to such amendment. (2) Subsection (a) shall not apply to benefits which may not be provided for designated employees in the event of early termination of the plan under provisions of the plan adopted pursuant to regulations prescribed by the Secretary of the Treasury to preclude the discrimination prohibited by section 401(a)(4) of the Internal Revenue Code of 1954. (3) The requirements of subsection (a)(2) shall be deemed to be satisfied in the case of a class ^ear plan if such plan provides that 100 percent of each employee's right to or derived from the contributions of the employer on his behalf with respect to any plan year are

^^^" amend-

Post, p. 938.

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"Class year ^ ^"'

PUBLIC LAW 93-406-SEPT. 2, 1974

nonforfeitable not later than the end of the 5th plan year following ^]^Q plan year for which such contributions were made. For purposes of this part, the term "class year plan" means a profit sharing, stock bonus, or money purchase plan which provides for the separate nonforfeitability of employees' rights to or derived from the contributions for each plan year. (d) A pension plan may allow for nonforfeitable benefits after a lesser period and in greater amounts than are required by this part. BENEFIT

29 USC 1054.

[88 STAT.

ACCRUAL

REQUIREMENTS

gEc. 204. (a) Each pension plan shall satisfy the requirements of subsection (b)(2), and in the case of a defined benefit plan shall also satisfy the requirements of subsection (b)(1). (b)(1)(A) A defined benefit plan satisfies the requirements of this paragraph if the accrued benefit to which each participant is entitled upon his separation from the service is not less than— (i) 3 percent of the normal retirement benefit to which he would be entitled at the normal retirement age if he commenced participation at the earliest possible entry age under the plan and served continuously until the earlier of age 65 or the normal retirement age specified under the plan, multiplied by (ii) the number of years (not in excess of 331^) of his participation in the plan. In the case of a plan providing retirement benefits based on compensation during any period, the normal retirement benefit to which a participant would be entitled shall be determined as if he continued to earn annually the average rate of compensation which he earned during consecutive years of service, not in excess of 10, for which his compensation was the highest. For purposes of this suparagraph, social security benefits and all other relevant factors used to compute benefits shall be treated as remaining constant as of the current year for all years after such current year. (B) A defined benefit plan satisfies the requirements of this paragraph of a particular plan year if under the plan the accrued benefit payable at the normal retirement age is equal to the normal retirement benefit and the annual rate at which any individual who is or could be a participant can accrue the retirement benefits payable at normal retirement age under the plan for any later plan year is not more than 1331^ percent of the annual rate at which he can accrue benefits for any plan year beginning on or after such particular plan year and before such later plan year. For purposes of this subparagraph— (i) any amendment to the plan which is in effect for the current year shall be treated as in effect for all other plan years; (ii) any change in an accrual rate which does not apply to any individual who is or could be a participant in the current year shall be disregarded; (iii) the fact that benefits under the plan may be payable to certain employees before normal retirement age shall be disregarded; and (iv) social security benefits and all other relevant factors used to compute benefits shall be treated as remaining constant as of the current year for all years after the current year. (C) A defined benefit plan satisfies the requirements of this paragraph if the accrued benefit to which any participant is entitled upon

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his separation from the service is not less than a fraction of the annual benefit commencing at normal retirement age to which he would be entitled under the plan as in effect on the date of his separation if he continued to earn annually until normal retirement age the same rate of compensation upon which his normal retirement benefit would be computed under the plan, determined as if he had attained normal retirement age on the date any such determination is made (but taking into account no more than the 10 years of service immediately preceding his separation from service). Such fraction shall be a fraction, not exceeding 1, the numerator of which is the total number of his years of participation in the plan (as of the date of his separation from the service) and the denominator of which is the total number of years he would have participated in the plan if he separated from the service at the normal retirement age. For purposes of this subparagraph, social security benefits and all other relevant factors used to compute benefits shall be treated as remaining constant as of the current year for all years after such current year. (D) Subparagraphs (A), (B), and (C) shall not apply with respect to years of participation before the first plan year to which this section applies but a defined benefit plan satisfies the requirements of this subparagraph with respect to such years of participation only if the accrued benefit of any participant with respect to such years of participation is not less than the greater of— (i) his accrued benefit determined under the plan, as in effect from time to time prior to the date of the enactment of this Act, or (ii) an accrued benefit which is not less than one-half of the accrued benefit to which such participant would have been entitled if subparagraph (A), (B), or (C) applied with respect to such years of participation. (E) Notwithstanding subparagraphs (A), (B), and (C) of this paragraph, a plan shall not be treated as not satisfying the requirements of this paragraph solely because the accrual of benefits under the plan does not become effective until the employee has two continuous years of service. For purposes of this subparagraph, the term ser^ilT^'°^ "years of service" has the meaning provided by section 202(a)(3)(A). (F) Notwithstanding subparagraphs (A), (B), and (C), a defined benefit plan satisfies the requirements of this paragraph if such plan— (i) is funded exclusively by the purchase of insurance contracts, and (ii) satisfies the requirements of paragraphs (2) and (3) of section 301(b) (relating to certain insurance contract plans), but only if an employee's accrued benefit as of any applicable date is not less than the cash surrender value his insurance contracts would have on such applicable date if the requirements of paragraphs (4), (5), and (6) of section 301(b) were satisfied. (G) Notwithstanding the preceding subparagraphs, a defined benefit plan shall be treated as not satisfying the requirements of this paragraph if the participant's accrued benefit is reduced on account of any increase in his age or service. The preceding sentence shall not apply to benefits under the plan commencing before benefits payable under title II of the Social Security Act which benefits under the ''^ "^^ '*°^plan— 'i) do not exceed social security benefits, and ^ii) terminate when such social security benefits commence.

859

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" Year of participation."

Part time employees.

Service less than 1,000 hours.

Seasonal industry.

Maritime industry. Regulations.

PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

(2) A plan satisfies the requirements of this paragraph if— (A) in the case of a defined benefit plan, the jnan requires separate accounting for the portion of each employee's accrued benefit derived from any voluntary employee contributions permitted under the plan; and (B) in the case of any plan which is not a defined benefit plan, the plan requires separate accounting for each employee's accrued benefit. (3)(A) For purposes of determining an employee's accrued benefit, the term "year of participation" means a period of service (beginning at the earliest date on which the employee is a participant in the plan and which is included in a period of service required to be taken mto account under section 202(b)) as determined under regulations prescribed by the Secretary which provide for the calculation of such period on any reasonable and consistent basis. (B) For purposes of this paragraph, except as provided in subparagraph (C), in the case of any employee whose customary employment is less than full time, the calculation of such employee's service on any basis which provides less than a ratable portion of the accrued benefit to which he would be entitled under the plan if his customary employment were full time shall not be treated as made on a reasonable and consistent basis. (C) For purposes of this paragraph, in the case of any employee whose service is less than 1,000 hours during any calendar year, plan year or other 12-consecutive-month period designated by the plan (and not prohibited under regulations prescribed by the Secretary) the calculation of his period of service shall not be treated as not made on a reasonable and consistent basis merely because such service is not taken into account. (D) In the case of any seasonal industry where the customary period of employment is less than 1,000 hours during a calendar year, the term "year of participation" shall be such period as determined under regulations prescribed by the Secretary. (E) For purposes of this subsection in the case of any maritime industry, 125 days of service shall be treated as a year of participation. The Secretary may prescribe regulations to carry out the purposes of this subparagraph. (c)(1) For purposes of this section and section 203 an employee's accrued benefit derived from employer contributions as of any applicable date is the excess (if any) of the accrued benefit for such employee as of such applicable date over the accrued benefit derived from contributions made by such employee as of such date. (2)(A) I n the case of a plan other than a defined benefit plan, the accrued benefit derived from contributions made by an employee as of any applicable date is— (i) except as provided in clause (ii), the balance of the employee's separate account consisting only of his contributions and the income, expenses, gains, and losses attributable thereto, or (ii) if a separate account is not maintained with respect to an employee's contributions under such a plan, the amount which bears the same ratio to his total accrued benefit as the total amount of the employee's contributions (less withdrawals) bears to the sum of such contributions and the contributions made on his behalf by the employer (less withdrawals). (B)(i) I n the case of a defined benefit plan providing an annual benefit in the form of a single life annuity (without ancillary benefits) commencing at normal retirement age, the accrued benefit derived from contributions made by an employee as of any applicable date is the

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PUBLIC LAW 93-406-SEPT. 2, 1974

annual benefit equal to the employee's accumulated contributions multiplied by the appropriate conversion factor. (ii) For purposes of clause (i), the term "appropriate conversion factor" means the factor necessary to convert an amount equal to the accumulated contributions to a single life annuity (without ancillary benefits) commencing at normal retirement age and shall be 10 percent for a normal retirement age of 65 years. For other normal retirement ages the conversion factor shall be determined in accordance with regulations prescribed by the Secretary of the Treasury or his delegate. (C) For purposes of this subsection, the term "accumulated contributions" means the total of— (i) all mandatory contributions made by the employee, (ii) interest (if any) under the plan to the end of the last plan year to which section 203(a)(2) does not apply (by reason of the applicable effective date), and (iii) interest on the sum of the amounts determined under clauses (i) and (ii) compounded annually at the rate of 5 percent per annum from the beginning of the first plan year to which section 203(a)(2) applies (by reason of the applicable effective date) to the date upon which the employee would attain normal retirement age. For purposes of this subparagraph, the term "mandatory contributions" means amounts contributed to "the plan by the employee which are required as a condition of employment, as a condition of participation in such plan, or as a condition of obtaining benefits under the plan attributable to employer contributions. (D) The Secretary of the Treasury is authorized to adjust by regulation the conversion factor described in subparagraph (B), the rate of interest described in clause (iii) of subparagraph (C), or both, from time to time as he may deem necessary. The rate of interest shall bear the relationship to 5 percent which the Secretary of the Treasury determines to be comparable to the relationship which the long-term money rates and investment yields for the last period of 10 calendar years ending at least 12 months before the beginning of the plan year bear to the long-term money rates and investment yields for the 10-calendar year period 1964 through 1973. No such adjustment shall be effective for a plan year beginning before the expiration of 1 year after such adjustment is determined and published. (E) The accrued benefit derived from employee contributions shall •

1,1

J.

j>

X

^

861

"Appropriate factor."

"Accumulated contributions."

^J^^fbutionT"

f^^°^^^^^^°^^. menu' ^

Accrued benefit, limitation.

not exceed the greater ol— (i) the employee's accrued benefit under the plan, or (ii) the accrued benefit derived from employee contributions determined as though the amounts calculated under clauses (ii) and (iii) of subparagraph (C) were zero. (3) For purposes of this section, in the case of any defined benefit plan, if an employee's accrued benefit is to be determined as an amount other than an annual benefit commencing at normal retirement age, or if the accrued benefit derived from contributions made by an employee is to be determined with respect to a benefit other than an annual benefit in the form of a single life annuity (without ancillary benefits) commencing at normal retirement age, the employee's accrued benefit, or the accrued benefits derived from contributions made by an employee, as the case may be, shall be the actuarial equivalent of such benefit or amount determined under paragraph (1) or (2). (4) I n the case of a defined benefit plan which permits voluntary employee contributions, the portion of an employee's accrued benefit derived from such contributions shall be treated as an accrued benefit derived from employee contributions under a plan other than a defined benefit plan.

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text:
Author:William Blake Richmond

Works

 * (Modern)

title: Author:William Blake Richmond


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[88 STAT.

(d) Notwithstanding section 203(b)(1), for purposes of determining the employee's accrued benefit under the plan, the plan may disregard service performed by the employee with respect to which he has received— (1) a distribution of the present value of his entire nonforfeitable benefit if such distribution was in an amount (not more than $1,750) permitted under regulations prescribed by the Secretary of the Treasury, or (2) a distribution of the present value of his nonforfeitable benefit attributable to such service which he elected to receive. Paragraph (1) shall apply only if such distribution was made on termination of the employee's participation in the plan. Paragraph (2) shall apply only if such distribution was made on termination of the employee's participation in the plan or under such other circumstances as may be provided under regulations prescribed by the Secretary of the Treasury. (e) For purposes of determining the employee's accrued benefit, the plan shall not disregard service as provided in subsection (d) unless the plan provides an opportunity for the participant to repay the full amount of a distribution described in subsection (d) with, in the case of a defined benefit plan, interest at the rate determined for purposes of subsection (c)(2)(C) and provides that upon such repayment the employee's accrued benefit shall be recomputed by taking into account service so disregarded. This subsection shall apply only in the case of a participant who— (1) received such a distribution in any plan year to which this section applies, which distribution was less than the present value of his accrued benefit, (2) resumes employment covered under the plan, and (3) repays the full amount of such distribution with, in the case of a defined benefit plan, interest at the rate determined for purposes of subsection (c)(2)(C). In the case of a defined contribution plan, the plan provision required under this subsection may provide that such repayment must be made before the participant has any 1-year break in service commencing after such withdrawal. (f) For the purposes of this part, an employer shall be treated as maintaining a plan if any employee of such employer accrues benefits under such plan by reason of service with such employer. (g) The accrued benefit of a participant under a plan may not be decreased by an amendment of the plan, other than an amendment described in section 302(c)(8). (h) CROSS REFERENCE.— For special rules relating to class year plans and plan provisions adopted to preclude discrimination, see sections 203(c)(2) and (3). JOINT AND SURVIVOR ANNUITY REQUIREMENT 29 USC 1055.

SEC. 205. (a) If a pension plan provides for the payment of benefits in the form of an annuity, such plan shall provide for the payment of annuity benefits in a form having the effect of a qualified joint and survivor annuity. (b) I n the case of a plan which provides for the payment of benefits before the normal retirement age as defined in section 3(24), the plan is not required to provide for the payment of annuity benefits in a form having the effect of a qualified joint and survivor annuity during the period beginning on the date on which the employee enters into the plan as a participant and ending on the later of— (1) the date the employee reaches the earliest retirement age, or ^

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(2) the first day of the 120th month beginning before the date on which the employee reaches normal retirement age. (c)(1) A plan described in subsection (b) does not meet the requirements of subsection (a) unless, under the plan, a participant has a reasonable period in which he may elect the qualified joint and survivor annuity form with respect to the period beginning on the date on which the period described in subsection (b) ends and ending on the date on which he reaches normal retirement age if he continues his employment during that period. (2) A plan does not meet the requirements of this subsection unless, in the case of such election, the payments under the survivor annuity are not less than the payments which would have been made under the joint annuity to which the participant would have been entitled if he had made an election under this subsection immediately prior to his retirement and if his retirement had occurred on the date immediately preceding the date of his death and within the period within which an election can be made. (d) A plan shall not be treated as not satisfying the requirements of this section solely because the spouse of the participant is not entitled to receive a survivor annuity (whether or not an election has been made under subsection (c)) unless the participant and his spouse have been married throughout the 1-year period ending on the date of such participant's death. (e) A plan shall not be treated as satisfying the requirements of this section unless, under the plan, each participant has a reasonable period (as prescribed by the Secretary of the Treasury by regulations) before the annuity starting date during which he may elect in writing (after having received a written explanation of the terms and conditions of the. joint and survivor annuity and the effect of an election under this subsection) not to take such joint and survivor annuity. (f) A plan shall not be treated as not satisfying the requirements of this section solely because, under the plan there is a provision that any election under subsection (c) or (e), and any revocation of any such election, does not become effective (or ceases to be effective) if the participant dies within a period (not in excess of 2 years) beginning on the date of such election or revocation, as the case may be. The preceding sentence does not apply unless the plan provision described in the preceding sentence also provides that such an election or revocation will be given effect in any case in which— (1) the participant dies from accidental causes, (2) a failure to give effect to the election or revocation would deprive the participant's survivor of a survivor annuity, and (3) such election or revocation is made before such accident occurred. (g) For purposes of this section: (1) The term "annuity starting date" means the first day of the first period for which an amount is received as an annuity (whether by reason of retirement or by reason of disability). (2) The term "earliest retirement age" means the earliest date on which, under the plan, the participant could elect to receive retirement benefits. (3) The term "qualified joint and survivor annuity" means an annuity for the life of the participant with a survivor annuity for the life of his spouse which is not less than one-half of, or greater than, the amount of the annuity payable during the joint lives of the participant and his spouse and which is the actuarial equivalent of a single annuity for the life of the participant.

863

Definitions.

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[88 STAT.

(h) For the purposes of this section, a plan may take into account in any equitable fashion (as determined by the Secretary of the Treasury) any increased costs resulting from providing joint and survivor annuity benefits under an election made under subsection (c). (i) This section shall apply only if— (1) the annuity starting date did not occur before the effective date of this section, and (2) the participant was an active participant in the plan on or after such effective date. OTHER PROVISIONS RELATING TO FORM A N D P A Y M E N T OF B E N E F I T S 29 USC 1056.

45 USC 228a.

SEC. 206. (a) Each pension plan shall provide that unless the participant otherwise elects, the payment of benefits under the plan to the participant shall begin not later than the 60th day after the latest of the close of the plan year in which—• (1) the date on which the participant attains the earlier of age 65 or the normal retirement age specified under the plan, (2) occurs the 10th anniversary of the year in which the participant commenced participation in the plan, or (3) the participant terminates his service with the employer. In the case of a plan which provides for the payment of an early retirement benefit, such plan shall provide that a participant who satisfied the service requirements for such early retirement benefit, but separated from the service (with any nonforfeitable right to an accrued benefit) before satisfying the age requirement for such early retirement benefit, is entitled upon satisfaction of such age requirement to receive a benefit not less than the benefit to which he would be entitled at the normal retirement age, actuarially reduced under regulations prescribed by the Secretary of the Treasury. (b) I f (1) a participant or beneficiary is receiving benefits under a pension plan, or (2) a participant is separated from the service and has nonforfeitable rights to benefits, a plan may not decrease benefits of such a participant by reason of any increase in the benefit levels payable under title II of the Social Sccurity Act or the Railroad Retirement Act of 1937, or any increase in the wage base under such title II, if such increase takes place after the date of the enactment of this Act or (if later) the earlier of the date of first entitlement of such benefits or the date of such separation. (c) No pension plan may provide that any part of a participant's accrued benefit derived from employer contributions (whether or not otherwise nonforfeitable) is forfeitable solely because of withdrawal by such participant of any amount attributable to the benefit derived from contributions made by such participant. The preceding sentence shall not apply (1) to the accrued benefit of any participant unless, at the time of such withdrawal, such participant has a nonforfeitable right to at least 50 percent of such accrued benefit, or (2) to the extent that an accrued benefit is permitted to be forfeited in accordance with section 203(a)(3)(D) (iii). (d)(1) Each pension plan shall provide that benefits provided under the plan may not be assigned or alienated. (2) For the purposes of paragraph (1) of this subsection, there shall not be taken into account any voluntary and revocable assignment of not to exceed 10 percent of any benefit payment, or of any irrevocable assignment or alienation of benefits executed before the

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Page:United States Statutes at Large Volume 88 Part 1.djvu/909

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PUBLIC LAW 93-406-SEPT. 2, 1974

date of enactment of this Act. The preceding sentence shall not apply to any assignment or alienation made for the purposes of defraying plan administration costs. For purposes of this paragraph a loan made to a participant or beneficiary shall not be treated as an assignment or alienation if such loan is secured by the participant's accrued nonforfeitable benefit and is exempt from the tax imposed by section 4975 of the Internal Revenue Code of 1954 (relating to tax on prohibited transactions) by reason of section 4975(d)(1) of such Code. TEMPORARY VARIANCES FROM CERTAIN VESTING

865

Post,

p. 971,

REQUIREMENTS

SEC. 207. In the case of any plan maintained on January 1, 1974, if, 29 USC ios7. not later than 2 years after the date of enactment of this Act, the administrator petitions the Secretary, the Secretary may prescribe an alternate method which shall be treated as satisfying the requirements of section 203(a)(2) or 204(b)(1) (other than subparagraph (D) thereof) or both for a period of not more than 4 years. The Secretary may prescribe such alternate method only v^^hen he finds that— (1) the application of such requirements would increase the costs of the plan to such an extent that there would result a substantial risk to the voluntary continuation of the plan or a substantial curtailment of benefit levels or the levels of employees' compensation, (2) the application of such requirements or discontinuance of the plan would be adverse to the interests of plan participants in the aggregate, and (3) a waiver or extension of time granted under section 303 or 304 of this Act would be inadequate. ^ ^P°^ *> PP873. In the case of any plan with respect to which an alternate method has been prescribed under the preceding provisions of this subsection for a period of not more than 4 years, if, not later than 1 year before the expiration of such period, the administrator petitions the Secretary for an extension of such alternate method, and the Secretary makes the findings required by the preceding sentence, such alternate method may be extended for not more than 3 years. MERGERS AND CONSOLIDATIONS OF PLANS OR TRANSFERS OF P L A N ASSETS

SEC. 208. A pension plan may not merge or consolidate with, or transfer its assets or liabilities to, any other plan after the date of the enactment of this Act, unless each participant in the plan would (if the plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the plan had then terminated). This paragraph shall apply in the case of a multiemployer plan only to the extent determined by the Pension Benefit Guaranty Corporation.

29 USC 1058.

RECORDKEEPING AND REPORTING REQUIREMENTS

SEC. 209. (a)(1) Except as provided by paragraph (2) every employer shall, in accordance with regulations prescribed by the Secretary, maintain records with respect to each of his employees sufficient to determine the benefits due or which may become due to such employees. The plan administrator shall make a report, in such manner and at such time as may be provided in regulations prescribed by the

29 USC 1059.

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PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

Secretary, to each employee who is a participant under the plan and Avho— (A) requests such report, in such manner and at such time as may be provided in such regulations, (B) terminates his service with the employer, or (C) has a 1-year break in service (as defined in section 203 (b)(3)(A)). The employer shall furnish to the plan administrator the information necessary for the administrator to make the reports required by the preceding sentence. Not more than one report shall be required under subparagraph (A) in any 12-month period. Not more than one report shall be required under subparagraph (C) with respect to consecutive 1-year breaks in service. The report required under this paragraph shall be sufficient to inform the employee of his accrued benefits under the plan and the percentage of such benefits which are nonforfeitable under the plan. (2) If more than one employer adopts a plan, each such employer shall, in accordance with regulations prescribed by the Secretary, furnish to the plan administrator the information necessary for the administrator to maintain the records and make the reports required by paragraph (1). Such administrator shall maintain the records and, to the extent provided under regulations prescribed by the Secretary, make the reports, required by paragraph (1). Noncompliance, ^j^^ j£ g^j^y persou who is required, under subsection (a), to furnish information or maintain records for any plan year fails to comply with such requirement, he shall pay to the Secretary a civil penalty of $10 for each employee with respect to whom such failure occurs, unless it is shown that such failure is due to reasonable cause. P L A N S M A I N T A I N E D BY MORE T H A N O N E EMPLOYER, PREDECESSOR P L A N S, AND EMPLOYER GROUPS

29 USC 1060.

use 1563.

gj,^^ 210. (a) Notwithstanding any other provision of this part or part 3, the following provisions of this subsection shall apply to a plan maintained by more than one employer: (1) Section 202 shall be applied as if all employees of each of the employers were employed by a single employer. (2) Sections 203 and 204 shall be applied as if all such employers constituted a single employer, except that the application of any rules with respect to breaks in service shall be made under regulations prescribed by the Secretary. (3) The minimum funding standard provided by section 302 shall be determined as if all participants in the plan were employed by a single employer. (b) For purposes of this part and part 3— (1) in any case in which the employer maintains a plan of a predecessor employer, service for such predecessor shall be treated as service for the employer, and (2) in any case in which the employer maintains a plan which is not the plan maintained by a predecessor employer, service for such predecessor shall, to the extent provided in regulations prescribed by the Secretary of the Treasury, be treated as service for the employer. (c) For purposes of sections 202, 203, and 204, all employees of all corporations which are members of a controlled group of corporations (within the meaning of section 1563(a) of the Internal Revenue Code Qf ]L954^ determined without regard to section 1563(a)(4) and (e)(3) (C) of such code) shall be treated as employed by a single employer.

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Page:The Eurypterida of New York Volume 1.pdf/86

 species. The presence here of heavy beds of conglomerate with very thin shale seams between corroborates the view that these forms were but little adapted to digging in the mud. The prevalence of Stylonurus in the fauna would seem to support Laurie's suggestion that Stylonurus possessed purely littoral habits.

The sedimentary facies in which the Otisville and Schenectady faunas are involved is not a usual accompaniment of the eurypterids, as fine mud rocks constitute the prevailing sediment and relatively broad-headed forms the expression of the body.

If one tries to picture the group as a whole, the typical habit would appear to be that of the mud grubber, and the broad carapace, relatively broad preabdomen, the flippers and the tail spine will be the most important elements in producing this picture.

It is very interesting to note in this connection that a subclass of an entirely different phylum, viz, the Ostracophora (Cephalaspis, Pteraspis [Old Red Sandstone of Scotland]), among the fishes, lived at the same time with the eurypterids, is frequently associated with them in the rocks, had acquired the same mud groveling habit and a similar general form. The theory that these earliest fishlike vertebrates are derived from the arthropod stem, and have features in common with the merostomes (eurypterids) and arachnids (scorpions etc.) is still seriously defended by some competent investigators. Eastman, in an excellent essay on the evolutionary history of the fishes, has emphasized the fact that the merostomes and arachnids at this early date had already diverged too widely along certain directions from the primal trilobitic type of organism, to be the possible ancestors of backboned animals, and such resemblances as are shared by merostomes and early fishlike vertebrates are explained as "due to mimicry, or to adaptation of creatures of different grades to a similar environment."

We are here not so much interested in the problem of the possible derivation of the vertebrates from the merostomes, as in the fact of the


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PUBLIC LAW 93-406-SEPT. 2, 1974

867

With respect to a plan adopted by more than one such corporation, the minimum funding standard of section 302 shall be determined as if all such employers were a single employer, and allocated to each employer in accordance with regulations prescribed by the Secretary of the Treasury. (d) For purposes of sections 202, 203, and 204, under regulations prescribed by the Secretary of the Treasury, all employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer. The regulations prescribed under this subsection shall be based on principles similar to the principles which apply in the case of subsection (c). EFFECTIVE DATES

SEC. 211. (a) Except as otherwise provided in this section, this part 29 USC 1061. shall apply in the case of plan years beginning after the date of the enactment of this Act. (b)(1) Except as otherwise provided in subsection (d), sections 205, 206(d), and 208 shall apply with respect to plan years beginning after December 31, 1975. (2) Except as otherwise provided in subsections (c) and (d) in the case of a plan in existence on January 1, 1974, this part shall apply in the case of plan years beginning after December 31, 1975. (c)(1) I n the case of a plan maintained on January 1, 1974, pursuant to one or more agreements which the Secretary finds to be collective bargaining agreements between employee organizations and one or more employers, no plan shall be treated as not meeting the requirements of sections 204 and 205 solely by reason of a supplementary or special plan provision (within the meaning of paragraph (2)) for any plan year before the year which begins after the earlier of— (A) the date on which the last of such agreements relating to the plan terminates (determined without regard to any extension thereof agreed to after the date of the enactment of this Act), or (B) December 31, 1980. For purposes of subparagraph (A) and section 306(c), any plan amendment made pursuant to a collective bargaining agreement relating to the plan which amends the plan solely to conform to any requirement contained in this Act or the Internal Revenue Code of 1954 26 USC i et shall not be treated as a termination of such collective bargaining ^^^* agreement. This paragraph shall not apply unless the Secretary determines that the participation and vesting rules in effect on the date of enactment of this Act are not less favorable to participants, in the aggregate, than the rules provided under sections 202, 203, and 204. (2) For purposes of paragraph (1), the term "supplementary or "Supplementary • ^

^

'-

^ • '

M

c 5 j. \ / 7

_^

trr

j

or s p e c i a l plan

special plan provision" means any plan provision which— provision." (A) provides supplementary benefits, not in excess of one-third of the basic benefit, in the form of an annuity for the life of the participant, or (B) provides that, under a contractual agreement based on medical evidence as to the effects of working in an adverse environment for an extended period of time, a participant having 25 years of service is to be treated as having 30 years of service. (3) This subsection shall apply with respect to a plan if (and only if) the application of this subsection results in a later effective date for this part than the effective date required by subsection (b). (d) If the administrator of a plan elects under section 1017(d) of this Act to make applicable to a plan year and to all subsequent plan ^°«'' P- ^32. years the provisions of the Internal Revenue Code of 1954 relating to

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Page:United States Statutes at Large Volume 88 Part 1.djvu/912

 868

PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

participation, vesting, funding, and form of benefit, this part shall apply to the first plan year to which such election applies and to all subsequent plan years. (e)(1) No pension plan to which section 202 applies may make effective any plan amendment with respect to breaks in service (which amendment is made or becomes effective after January 1, 1974, and before the date on which section 202 first becomes effective with respect to such plan) which provides that any employee's participation in the plan would commence at any date later than the later of— (A) the date on which his participation would commence under the break in service rules of section 202(b), or (B) the date on which his participation would commence under the plan as in effect on January 1, 1974. (2) No pension plan to which section 203 applies may make effective any plan amendment with respect to breaks in service (which amendment is made or becomes effective after January 1, 1974, and before the date on which section 203 first becomes effective with respect to such plan) if such amendment provides that the nonforfeitable benefit derived from employer contributions to which an}'^ employee would be entitled is less than the lesser of the nonforfeitable benefit derived from employer contributions to which he would be entitled under-— (A) the break in service rules of section 202(b)(3), or (B) the plan as in effect on January 1, 1974. Subparagraph (B) shall not apply if the break in service rules under the plan would have been in violation of any law or rule of law in effect on January 1, 1974. PART 3—FUNDING COVERAGE

2 USC 1081.

26 USC 501,

26 USC 736. Post, p. 959.

g^^ gQ-j^ ^^^ This part shall apply to any employee pension benefit plan described in section 4(a), (and not exempted under section 4(b)), other than— (1) an employee welfare benefit plan; (2) an insurance contract plan described in subsection (b); (3) a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees; (4)(A) a plan which is established and maintained by a society, order, or association described in section 501(c)(8) or (9) of the Internal Revenue Code of 1954, if no part of the contributions to or under such plan are made by employers of participants in such plan; or (B) a trust described in section 501(c) (18) of such Code; (5) a plan which has not at any time after the date of enactment of this Act provided for employer contributions; (6) an agreement providing payments to a retired partner or deceased partner or a deceased partner's successor in interest as described in section 736 of the Internal Revenue Code of 1954; (7) an individual retirement account or annuity as described in section 408(a) of the Internal Revenue Code of 1954, or a retirement bond described in section 409 of such Code; (8) an individual account plan (other than a money purchase plan) and a defined benefit plan to the extent it is treated as an individual account plan (other than a money purchase plan) under section 3 (35)(B) of this title; or (9) an excess benefit plan.

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PUBLIC LAW 93-406-SEPT. 2, 1974

869

(b) For the purposes of paragraph (2) of subsection (a) a plan is tract"pi*an"" '^°"" an "insurance contract plan" 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), (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 of the Treasury to have the same characteristics as contracts described in the preceding sentence shall be treated as a plan described in this subsection. MINIMUM

FUNDING

STANDARDS

SEC. 302. (a)(1) Every employee pension benefit plan subject to ^9 USC io82. this part shall satisfy the minimum funding standard (or the alternative minimum funding standard under section 305) for any plan year to which this part applies. A plan to which this part applies shall have satisfied the minimum 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. ,^ (2) For the purposes of this part, the term "accumulated funding fun<fingX"^^*^'^ deficiency" means for any plan the excess of the total charges to the ficiency." funding standard account for all plan years (beginning with the first plan year to which this part 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)(1) Each plan to which this part applies shall establish and J""ding stand•

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i

1

1

r

ip(

1

1

m 1

T

1 ^ " " ^ account.

maintain a funding standard account, huch account shall be credited and charged solely as provided in this section. (2) 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 part 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

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Page:United States Statutes at Large Volume 88 Part 1.djvu/914

 870

PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

part 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 section 303(c)) for each prior plan year in equal annual installments (until fully amortized) over a period of 15 plan years, and (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) 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), (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 section 303(c)) 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) Under regulations prescribed by the Secretary of the Treasury, 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

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Page:United States Statutes at Large Volume 88 Part 1.djvu/915

 88 STAT. ]

PUBLIC LAW 93-406-SEPT. 2, 1974

amortization periods for all items entering into whichever of the two amounts being offset is the greater. (5) The funding standard account (and items therein) shall be charged or credited (as determined under regulations prescribed by the Secretary of the Treasury) with interest at the appropriate rate consistent with the rate or rates of interest used under the plan to determine costs. (c)(1) For purposes of this part, 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. (2)(A) For purposes of this part, 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 of the Treasury. (B) For purposes of this part, 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 of the Treasury shall by regulations provide, shall apply to all such evidences of indebtedness, and may be revoked only with the consent of the Secretary of the Treasury. (3) For purposes of this part, 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) 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 of the Internal Revenue Code of 1954, or a change in the amount of such wages taken into account under regulations prescribed for purposes of section 401(a)(5) of the Internal Revenue Code of 1954, 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) If the funding method for a plan is changed, the new funding method shall become the funding method used to determine costs and liabilitievS under the plan only if the change is approved by the Secretary of the Treasury. 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 of the Treasury. (6) 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.

871

'*^ ^^^ ^^°^* 26 USC 3121. 26 USC 401.

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Page:United States Statutes at Large Volume 88 Part 1.djvu/916

 PUBLIC LAW 93-406-SEPT. 2, 1974

872 " F u l l fundi limitation,"

Post,

p. 914.

(7) For purposes of paragraph (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) For purposes of this part, any amendment applying to a plan year which— (A) is adopted after the close of such plan year but no later than 21/^ 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 described in this paragraph which reduces the accrued benefits of any participant shall take effect unless the plan administrator files a notice with the Secretary notifying him of such amendment and the Secretary has approved such amendment or, within 90 days after the date on which such notice was filed, failed to disapprove such amendment. No amendment described in this subsection shall be approved by the Secretary unless he determines that such amendment is necessary because of a substantial business hardship (as determined under section 303(b)) and that waiver under section 303(a) is unavailable or inadequate. (9) For purposes of this part, 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 of the Treasury. (10) For purposes of this part, any contributions for a plan year made by an employer after the last day of such plan year, but not later than 21/^ months after such day, shall be deemed to have been made on such last day. For purposes of this paragraph, such 21/^ month period may be extended for not more than 6 months under regulations prescribed by the Secretary of the Treasury. (d) CROSS REFERENCE.—For alternative amortization method for certain multiemployer plans see section 1013(d) of this Act. VARIANCE FROM MINIMUM

29 USC 1083.

Waiver.

Substantial b u s i n e s s hardship.

[88 STAT.

FUNDING

STANDARD

SEC. 303. (a) If an 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 application of the standard would be adverse to the interests of plan participants in the aggregate, the Secretary of the Treasury may waive the requirements of section 302(a) for such year with respect to all or any portion of the minimum funding standard other than the portion thereof determined under section 302(b)(2)(C). The Secretary of the Treasury shall not waive the minimum funding standard with respect to a plan for more than 5 of any 15 consecutive plan years. (b) For purposes of this part, the factors taken into account in determining substantial business hardship shall include (but shall not

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 88 STAT. ]

PUBLIC LAW 93-406-SEPT. 2, 1974

873

be limited to) whether— (1) the employer is operating at an economic loss, (2) there is substantial unemployment or underemployment in the trade or business and in the industry concerned, (3) the sales and profits of the industry concerned are depressed or declining, and (4) it is reasonable to expect that the plan will be continued only if the waiver is granted. (c) For purposes of this part, the term "waived funding defi- "waived funding ciency" means the portion of the minimum funding standard (deter- ^ i^^i^^cy. mined without regard to subsection (b)(3)(C) of section 302) for a plan year waived by the Secretary of the Treasury and not satisfied by employer contributions. (d)

CROSS REFERENCE.—

For corresponding duties of the Secretary of the Treasury with regard to implementation of the Internal Revenue Code of 1954, see section 412(d) of such Code. EXTENSION or AMORTIZATION PERIODS

SEC. 304, (a) The period of years required to amortize any unfunded 29 USC 1084. liability (described in any clause of subsection (b)(2)(B) of section 302) of any plan may be extended by the Secretary for a period of time (not in excess of 10 years) if he determines that such extension would carry out the purposes of this Act 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. (b)(1) 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 section 303(a) or an extension of time under subsection (a) of this section is in effect with respect to the plan, or if a plan amendment described in section 302(c)(8) has been made at any time in the preceding 12 months (24 months in the case of a multiemployer plan). 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) Paragraph (1) shall not apply to any plan amendment which— Nonapplica(A) the Secretary determines to be reasonable and which pro- ^'^^^y* vides for only de mmimis increases in the liabilities of the plan. (B) only repeals an amendment described in section 302(c) (C) is required as a condition of qualification under part I of subchapter D, of chapter 1, of the Internal Revenue Code of 1954.

Post, pp. 959, AI.TERNATIVE MINIMUM F U N D I N G STANDARD ,

.

9^g| ^ ^ ^ ' ^^'*' 2 6 u s e 401.

SEC. 305. (a) 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 section. (b) For a plan year the alternative minimum funding standard

29 USC loss.

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accounts shall be— (1) charged with the sum of— (A) the lesser of normal cost under the funding method used under the plan or normal cost determined under the unit credit method, (B) the excess, if any, of the present value of accrued benefits under the plan over the fair market value of the assets, and (C) an amount equal to the excess, if any, of credits to the alternative minimum funding standard account for all prior plan years over charges to such account for all such years, and (2) credited with the amount considered contributed by the employer to or under the plan (within the meaning of section 302(c) (10)) for the plan year. (c) The alternative minimum funding standard account (and items therein) shall be charged or credited with interest in the manner provided under section 302(b)(5) with respect to the funding standard account. EFFECTIVE DATES 29 USC 1086.

Post, p. 932.

26 USC 501,

gjjQ^ 3g_ (^2i) Except as otherwise provided in this section, this part shall apply in the case of plan years beginning after the date of the enactment of this Act. (b) Except as otherwise provided in subsections (c) and (d), in the case of a plan in existence on January 1, 1974, this part shall apply in the case of plan years beginning after December 31, 1975. (c)(1) In the case of a plan maintained on January 1, 1974, pursuant to one or more agreements which the Secretary finds to be collective bargaining agreements between employee representatives and one or more employers, this part shall apply only with respect to plan years beginning after the earlier of the date specified in subparagraph (A) or (B) of section 211(c)(1). (2) This subsection shall apply with respect to a plan if (and only if) the application of this subsection results in a later effective date for this part than the effective date required by subsection (b). (d) I n the case of a plan the administrator of which elects under section 1017(d) of this Act to have the provisions of the Internal Revenue Code of 1954 relating to participation, vesting, funding, and form of benefit to apply to a plan year and to all subsequent plan years, this part shall apply to plan years beginning on the earlier of the first plan year to which such election applies or the first plan year determined under subsections (a), (b), and (c) of this section. (e) I n the case of a plan maintained by a labor organization which is exempt from tax under section 501(c)(5) of the Internal Revenue Code of 1954 exclusively for the benefit of its employees and their beneficiaries, this part shall be applied by substituting for the term "December 31, 1975" in subsection (b), the earlier of— (1) the date on which the second convention of such labor organization held after the date of the enactment of this Act ends, or (2) December 31, 1980, but in no event shall a date earlier than the later of December 31, 1975, or the date determined under subsection (c) be substituted. PART 4—FIDUCIARY RESPONSIBILITY COVERAGE

29 USC 1101. Ante, p. 11.

g^j. 401. (a) This part shall apply to any employee benefit plan described in section 4(a) (and not exempted under section 4(b)),

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other than— (1) a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees; or (2) any agreement described in section 736 of the Internal Revenue Code of 1954, which provides payments to a retired partner or deceased partner or a deceased partner's successor in interest. (b) For purposes of this part: (1) In the case of a plan which invests in any security issued by an investment company registered under the Investment Company Act of 1940, the assets of such plan shall be deemed to include such security but shall not, solely by reason of such investment, be deemed to include any assets of such investment company. (2) I n the case of a plan to which a guaranteed benefit policy is issued by an insurer, the assets of such plan shall be deemed to include such policy, but shall not, solely by reason of the issuance of such policy, be deemed to include any assets of such insurer. For purposes of this paragraph: (A) The term "insurer" means an insurance company, insurance service, or insurance organization, qualified to do business in a State. (B) The term "guaranteed benefit policy" means an insurance policy or contract to the extent that such policy or contract provides for benefits the amount of which is guaranteed by the insurer. Such term includes any surplus in a separate account, but excludes any other portion of a separate account.

875

26 USC 736.

15 USC 80a-51.

"insurer." "Guaranteed

benefit policy.

ESTABLISHMENT OF PLAN

SEC. 402. (a)(1) Every employee benefit plan shall be established and maintained pursuant to a written instrument. Such instrument shall provide for one or more named fiduciaries who jointly or severally shall have authority to control and manage the operation and administration of the plan. (2) For purposes of this title, the term "named fiduciary" means a fiduciary who is named in the plan instrument, or who, pursuant to a procedure specified in the plan, is identified as a fiduciary (A) by a person who is an employer or employee organization with respect to the plan or (B) by such an employer and such an employee organization acting jointly. (b) Every employee benefit plan shall— (1) provide a procedure for establishing and carrying out a funding policy and method consistent with the objectives of the plan and the requirements of this title, (2) describe any procedure under the plan for the allocation of responsibilities for the operation and administration of the plan (including any procedure described in section 405(c)(1)), (3) provide a procedure for amending such plan, and for identifying the persons who have authority to amend the plan, and (4) specify the basis on which payments are made to and from the plan. (c) Any employee benefit plan may provide— (1) that any person or group of persons may serve in more than one fiduciary capacity with respect to the plan (including service both as trustee and administrator); (2) i/hat a named fiduciary, or a fiduciary designated by a named fiduciary pursuant to a plan procedure described in section 405 (c)(1), may employ one or more persons to render advice with regard to any responsibility such fiduciary has under the plan; or

29 USC 1102.

"Named fiduciary."

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(3) that a person who is a named fiduciary with respect to control or management of the assets of the plan may appoint an investment manager or managers to manage (including the power to acquire and dispose of) any assets of a plan. ESTABLISHMENT OF TRUST 29 USC 1103.

26 USC 401,

Post, p. 959.

Ante, Ante, Post,

p. 852. p. 868. p. 1003.

Post, p. 986. 26 USC 4 0 3. Post, p. 940. Post, 1025.

pp. 1021,

g^^^ Qg^ ^^^ Except as provided in subsection (b), all assets of an employee benefit plan shall be held in trust by one or more trustees. Such trustee or trustees shall be either named in the trust instrument or in the plan instrument described in section 402(a) or appointed by a person who is a named fiduciary, and upon acceptance of being named or appointed, the trustee or trustees shall have exclusive authority and discretion to manage and control the assets of the plan, except to the extent that— (1) the plan expressly provides that the trustee or trustees are subject to the direction of a named fiduciary who is not a trustee, in which case the trustees shall be subject to proper directions of such fiduciary which are made in accordance with the terms of the plan and which are not contrary to this title, or (2) authority to manage, acquire, or dispose of assets of the plan is delegated to one or more investment managers pursuant to section 402(c)(3). (b) The requirements of subsection (a) of this section shall not (1) to any assets of a plan which consist of insurance contracts or policies issued by an insurance company qualified to do business in a State; (2) to any assets of such an insurance company or any assets of a plan which are held by such an insurance company; (3) to apian— (i) some or all of the participants of which are employees described in section 401(c)(1) of the Internal Revenue Code of 1954; or (ii) which consists of one or more individual retirement accounts described in section 408 of the Internal Revenue Code of 1954, to the extent that such plan's assets are held in one or more custodial accounts which qualify under section 401(f) or 408(h) of such Code, whichever is applicable; (4) to a plan which the Secretary exempts from the requirement of subsection (a) and which is not subject to any of the following provisions of this Act— (A) part 2 of this subtitle, (B) part 3 of this subtitle, or (C) title IV of this Act; or (5) to a contract established and maintained under section 403 (b) of the Internal Revenue Code of 1954 to the extent that the assets of the contract are held in one or more custodial accounts pursuant to section 403(b)(7) of such Code. (c)(1) Except as provided in paragraph (2) or (3) or subsection (d), or under section 4042 and 4044 (relating to termination of insured plans), the assets of a plan shall never inure to the benefit of any employer and shall be held for the exclusive purposes of providing benefits to participants in the plan and their beneficiaries and defraying reasonable expenses of administering the plan. (2)(A) I n the case of a contribution which is made by an employer by a mistake of fact, paragraph (1) shall not prohibit the return of such contribution to the employer within one year after the payment of the contribution.

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(B) If a contribution is conditioned on qualification of the plan under section 401, 403(a), or 405(a) of the Internal Revenue Code of 1954, and if the plan does not qualify, then paragraph (1) shall not prohibit the return of such contribution to the employer within one year after the date of denial of qualification of the plan. (C) If a contribution is conditioned upon the deductibility of the contribution under section 404 of the Internal Revenue Code of 1954, then, to the extent the deduction is disallowed, paragraph (1) shall not prohibit the return to the employer of such contribution (to the extent disallowed) within one year after the disallowance of the deduction. (3) In the case of a contribution which would otherwise be an excess contribution (as defined in section 4972(b) of the Internal Revenue Code of 1954) paragraph (1) shall not prohibit a correcting distribution with respect to such contribution from the plan to the employer to the extent permitted in such section to avoid payment of an excise tax on excess contributions under such section. (d)(1) Upon termination of a pension plan to which section 4021 does not apply at the time of termination and to which this part applies (other than a plan to which no employer contributions have been made) the assets of the plan shall be allocated in accordance with the provisions of section 4044 of this Act, except as otherwise provided in regulations of the Secretary. (2) The assets of a welfare plan which terminates shall be distributed in accordance with the terms of the plan, except as otherwise provided in regulations of the Secretary.

877

26 USC 4 0 1, 403, 405.

^"^^ P- 92I.

Post,

p. 955.

^°^*' ^' ^°^^'

F I D U C I A R Y DUTIES'

SEC. 404. (a)(1) Subject to sections 403(c) and (d), 4042, and 4044, H^^^l^^^il' a fiduciary shall discharge his duties with respect to a plan solely in Post, pp.'1021', the interest of the participants and beneficiaries and— ^°25. (A) for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan; (B) with the care, skill, prudence, and diligence under the circurnstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; (C) by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and (D) in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this title. (2) In the case of an eligible individual account plan (as defined in section 407(d)(3)), the diversification requirement of paragraph (1) (C) and the prudence requirement (only to the extent that it requires diversification) of paragraph (1)(B) is not violated by acquisition or holding of qualifying employer real property or qualifying employer securities (as defined in section 407(d)(4) and (5)). (b) Except as authorized by the Secretary by regulation, no fiduciary may maintain the indicia of ownership of any assets of a plan outside the jurisdiction of the district courts of the United States. (c) I n the case of a pension plan which provides for individual accounts and permits a participant or beneficiary to exercise control over assets in his account, if a participant or beneficiary exercises con-

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trol over the assets in his account (as determined under regulations of the Secretary)— (1) such participant or beneficiary shall not be deemed to be a fiduciary by reason of such exercise, and (2) no person who is otherwise a fiduciary shall be liable under this part for any loss, or by reason of any breach, which results from such participant's or beneficiary's exercise of control. LIABILITY FOR BREACH BY CO-riDUCIARY 29 USC 1105.

SEC. 405. (a) In addition to any liability which he may have under any other provision of this part, a fiduciary with respect to a plan shall be liable for a breach of fiduciary responsibility of another fiduciary with respect to the same plan in the following circumstances: (1) if he participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other fiduciary, knowing such act or omission is a breach; (2) if, by his failure to comply with section 404(a)(1) in the administration of his specific responsibilities which give rise to his status as a fiduciary, he has enabled such other fiduciary to commit a breach; or (3) if he has knowledge of a breach by such other fiduciary, unless he makes reasonable efforts under the circumstances to remedy the breach. (b)(1) Except as otherwise provided in subsection (d) and in section 403(a)(1) and (2), if the assets of a plan are held by two or more trustees— (A) each shall use reasonable care to prevent a co-trustee from committing a breach; and (B) they shall jointly manage and control the assets of the plan, except that nothing in this subparagraph (B) shall preclude any agreement, authorized by the trust instrument, allocating specific responsibilities, obligations, or duties among trustees, in which event a trustee to whom certain responsibilities, obligations, or duties have not been allocated shall not be liable by reason of this subparagraph (B) either individually or as a trustee for any loss resulting to the plan arising from the acts or omissions on the part of another trustee to whom such responsibilities, obligations, or duties have been allocated. (2) Nothing in this subsection shall limit any liability that a fiduciary may have under subsection (a) or any other provision of this part, (3)(A) In the case of a plan the assets of which are held in more than one trust, a trustee shall not be liable under paragraph (1) except with respect to an act or omission of a trustee of a trust of which he is a trustee. (B) No trustee shall be liable under this subsection for following instructions referred to in section 403(a)(1). (c)(1) The instrument under which a plan is maintained may expressly provide for procedures (A) for allocating fiduciary responsibilities (other than trustee responsibilities) among named fiduciaries, and (B) for named fiduciaries to designate persons other than named fiduciaries to carry out fiduciary responsibilities (other than trustee responsibilities) under the plan. (2) If a plan expressly provides for a procedure described in paragraph (1), and pursuant to such procedure any fiduciary responsibility of a named fiduciary is allocated to any person, or a person is designated to carry out any such responsibility, then such named fiduciary

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shall not be liable for an act or omission of such person in carrying out such responsibility except to the extent that— (A) the named fiduciary violated section 404(a)(1)— (i) with respect to such allocation or designation, (ii) with respect to the establishment or implementation of the procedure under paragraph (1), or (iii) in continuing the allocation or designation; or (B) the named fiduciary would otherwise be liable in accordance with subsection (a). (3) For purposes of this subsection, the term "trustee responsibility" means any responsibility provided in the plan's trust instrument (if any) to manage or control the assets of the plan, other than a power under the trust instrument of a named fiduciary to appoint an investment manager in accordance with section 402(c)(3). (d)(1) If an investment manager or managers have been appointed under section 402(c)(3), then, notwithstanding subsections (a)(2) and (3) and subsection (b), no trustee shall be liable for the acts or omissions of such investment manager or managers, or be under an obligation to invest or otherwise manage any asset of the plan which is subject to the management of such investment manager. (2) Nothing in this subsection shall relieve any trustee of any liability under this part for any act of such trustee.

879

"Trustee responsibility."

Liability

PROHIBITED TRANSACTIONS

SEC, 406. (a) Except as provided in section 408: (1) A fiduciary with respect to a plan shall not cause the plan to engage in a transaction, if he knows or should know that such transaction constitutes a direct or indirect— (A) sale or exchange, or leasing, of any property between the plan and a party in interest; (B) lending of money or other extension of credit between the plan and a party in interest; (C) furnishing of goods, services, or facilities between the plan and a party in interest; (D) transfer to, or use by or for the benefit of, a party in interest, of any assets of the plan; or (E) acquisition, on behalf of the plan, of any employer security or employer real property in violation of section 407(a). (2) No fiduciary who has authority or discretion to control or manage the assets of a plan shall permit the plan to hold any employer security or employer real property if he knows or should know that holding such security or real property violates section 407(a). (b) A fiduciary with respect to a plan shall not— (1) deal with the assets of the plan in his own interest or for his own account, (2) in his individual or in any other capacity act in any transaction involving the plan on behalf of a party (or represent a party) whose interests are adverse to the interests of the plan or the interests of its participants or beneficiaries, or (3) receive any consideration for his own personal account from any party dealing with such plan in connection with a transaction involving the assets of the plan. (c) A transfer of real or personal property by a party in interest to a plan shall be treated as a sale or exchange if the property is subject to a mortgage or similar lien which the plan assumes or if it is subject to a mortgage or similar lien which a party-in-interest placed

29 USC 1106.

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on the property within the 10-year period ending on the date of the transfer. 1 0 P E R C E N T L I M I T A T I O N W I T H RESPECT TO ACQUISITION A N D HOLDING OF EMPLOYER SECURITIES A N D EMPLOYER REAL PROPERTY BY CERTAIN P L A N S

29 USC 1107.

Regulations.

gg^^ ^Q^^ ^^^ Except as otherwise provided in this section and section 414: (1) A plan may not acquire or hold— (A) any employer security which is not a qualifying employer security, or (B) any employer real property which is not qualifying employer real property. (2) A plan may not acquire any qualifying employer security or qualifying employer real property, if immediately after such acquisition the aggregate fair market value of employer securities and employer real property held by the plan exceeds 10 percent of the fair market value of the assets of the plan. (3)(A) After December 31, 1984, a plan may not hold any qualifying employer securities or qualifying employer real property (or both) to the extent that the aggregate fair market value of such securities and property determined on December 31, 1984, exceeds 10 percent of the greater of— (i) the fair market value of the assets of the plan, determined on December 31, 1984, or (ii) the fair market value of the assets of the plan determined on January 1, 1975. (B) Subparagraph (A) of this paragraph shall not apply to any plan which on any date after December 31, 1974; and before January 1, 1985, did not hold employer securities or employer real property (or both) the aggregate fair market value of which determined on such date exceeded 10 percent of the greater of (i) the fair market value of the assets of the plan, determined on such date, or (ii) the fair market value of the assets of the plan determined on January 1, 1975. (4)(A) After December 31, 1979, a plan may not hold any employer securities or employer real property in excess of the amount specified in regulations under subparagraph (B). This subparagraph shall not apply to a plan after the earliest date after December 31, 1974, on which it complies with such regulations. ^g) ^^^ j^^^j, ^^^^^ December 31, 1976, the Secretary shall prescribe regulations which shall have the effect of requiring that a plan divest itself of 50 percent of the holdings of employer securities and employer real property which the plan would be required to divest before January 1, 1985, under paragraph (2) or subsection (c) (whichever is applicable), (b)(1) Subsection (a) of this section shall not apply to any acquisition or holding of qualifying employer securities or qualifying employer real property by an eligible individual account plan. (2) CROSS REFERENCES.—

(A) For exemption from diversification requirements for holding of qualifying employer securities and qualifying employer real property by eligihle individual account plans, see section 404(a)(2). (B) For exemption from prohibited transactions for certain acquisitions of qualifying employer securities and qualifying employer real property which are not in violation of 10 percent limitation, see section 408(e). (C) For transitional rules respecting securities or real property subject to binding contracts in effect on June 30, 1974, see section 414(c).

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