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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 412(i) (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 412(i) were satisfied. "(G)

POS^, p. 914.

ACCRUED BENEFIT MAY NOT DECREASE ON ACCOUNT OF

INCREASING AGE O SERVICE.—Notwithstanding the preceding R 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 entitlement to benefits payable under title II of the Social Security Act which benefits under the plan— " (i) do not exceed such social security benefits, and "(ii) terminate when such social security benefits commence. "(2)

909

42 USC 401.

SEPARATE ACCOUNTING REQUIRED I N CERTAIN CASES.—^A

plan satisfies the requirements of this paragraph if— " (A) in the case of a defined benefit plan, the plan 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)

YEAR OF PARTICIPATION.—

" (A) DEFINITION.—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 into account under section 410(a)(5)) as determined under regulations prescribed by the Secretary of Labor which provide for the calculation of such period on any reasonable and consistent basis. " (B) LESS THAN FULL TIME SERVICE.—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)

LESS THAN 1,000 HOURS OF SERVICE DURING YEAR.—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 of Labor) the calculation of his period of service shall not be treated as not made on a reasonable and consistent basis solely because such service is not taken into account.

'*"'^' P* *^**

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Regulations.

PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

" (D) SEASONAL INDUSTRIES.—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 of Labor. " (E) MARITIME INDUSTRIES.—For purposes of this subsection, in the case of any maritime industry, 125 days of servicc shall be treated as a year of participation. The Secretary of Labor may prescribe regulations to carry out the purposes of this subparagraph. "(c) ALLOCATION OF ACCRUED BENEFITS BETWEEN EMPLOYER AND EMPLOYEE CONTRIBUTIONS.— "(1) ACCRUED BENEFIT DERIVED FROM EMPLOYER CONTRIBU-

TIONS.—For purposes of this section, 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) ACCRUED BENEFIT DERIVED FROM EMPLOYEE CONTRIBUTIONS.— " (A) PLANS OTHER THAN DEFINED BENEFIT PLANS.—In 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)

D E F I N E D BENEFIT P L A N S. —

" (i) IN GENERAL.—In 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 annual benefit equal to the employee's accumulated contributions multiplied by the appropriate conversion factor. "(ii)

APPROPRIATE CONVERSION FACTOR.—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 smgle 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 \^ith regulations prescribed by the Secretary or his delegate. "(C)

DEFINITION OF ACCUMULATED CONTRIBUTIONS.—For

purposes of this subsection, the term 'accumulated contributions' means the total of— "(i) all mandatory contributions made by the employee,

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PUBLIC LAW 93.406-SEPT. 2, 1974

911

"(ii) interest (if any) under the plan to the end of the last plan year to which subsecition (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 subsection (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 con- "Mandatory tributions' means amounts contributed to the plan by the '^°"t"butions." employee which are required as a condition of employment, as la condition of participation in such plan, or as a condition of obtaining benefits under the plan attributable to employer contributions. " (D) ADJUSTMENTS.—The Secretary or his delegate is authorized to adjust by regulation the conversion factor described in subparagraph (B), the rate of interest des<;ribed 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 or his delegate 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) LIMITATION.—The accrued benefit derived from employee contributions shall not exceed the greater of— "(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) ACTUARIAL ADJUSTMENT.—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 6ther 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). "(d)

SPECIAL RULES.—

"(1) COORDINATION WITH SECTION 40i(a)(4).—A plan which satisfies the requirements of this section shall be treated as satisfying any vesting requirements resulting from the application of section 401(a)(4) unless— " (A) there has been a pattern of abuse under the plan (such as a dismissal of employees before their accrued benefits become nonforfeitable) tending to discriminate in favor of employees who are officers, shareholders, or highly compensated, or

^°«'' p- ^38.

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PUBLIC LAW 9 3 - 4 0 6 - S E P T. 2, 1974

[88 STAT.

" (B) the r e h a v e been, o r the r e is reason to believe the r e will be, a n accrual of benefits o r for f e i t u r e s t e n d i n g to discrimin a t e i n favor of employees who a r e officers, s h a r e h o l d e r s, o r h i g h l y compensated. "(2)

Post, p. 9 3 8.

(a)

shall

not

a p p l y to benefits which may not be provided for designated employees i n the event of e a r l y termination of the p l a n under provisions of the p l a n a d o p t e d pursuant to r e g u l a t i o n s prescribed by the Secretary or h i s delega;te to p r e c l u d e the d i s c r i m i n a t i o n p r o h i b i t e d by section 401(a)(4). "(3)

Post, p. 914.

P R O H I B I T E D DISCRIMINATION.—Subsection

TERMINATION OR PARTIAL TERMINATION; DISCONTINUANCE

OF C O N T R I B U T I O N S. — Notwithstanding the provisions of subsection ' a), a t r u s t shall not c o n s t i t u t e a qualified t r u s t under section 401 ^a) unless the p l a n of which s u c h t r u s t is a part p r o v i d e s that — " (A) upon its termination or partial termination, or " (B) i n the case of a p l a n to which section 412 does not a p p l y, upon complete discontinuance of c o n t r i b u t i o n s under the plan, the r i g h t s of all affected employees to benefits accrued to the date of such termination, partial termination, o r discontinuance, to the e x t e n t f u n d e d as of such date, o r the a m o u n t s credited to the employees' accounts, a r e nonforfeitable. T h i s paragraph shall h o t a p p l y to benefits o r c o n t r i b u t i o n s which, under provisions of the p l a n a d o p t e d pursuant to r e g u l a t i o n s prescribed by the Secretary o r h i s delegate to p r e c l u d e the d i s c r i m i n a t i o n p r o h i b i t e d by sect i o n 4 0 1 (a)(4), may not b e used for designated employees in the event of e a r l y termination of the p l a n. "(4)

CLASS

YEAR

PLANS.—The

requirements

of

subsection

(a)(2) shall be deemed to b e satisfied i n the case of a class year p l a n if such p l a n p r o v i d e s that 100 p e r c e n t of each employee's r i g h t to or d e r i v e d from the c o n t r i b u t i o n s of the e m p l o y e r on h i s behalf w i t h respect to any p l a n year a r e n o n for f e i t a b l e not l a t e r than the e n d of the 5th p l a n year following the p l a n year for which such c o n t r i b u t i o n s were m a d e. For purposes of t h i s section, the term 'class year p l a n ' means a profit-sharing, stock bonus, o r money purchase p l a n which p r o v i d e s for the s e p a r a t e nonforfeita b i l i t y of employees' r i g h t s to o r derived from the c o n t r i b u t i o n s for each p l a n year. "(5)

T R E A T M E N T OF VOLUNTARY EMPLOYEE C O N T R I B U T I O N S. — I n

the case of a defined benefit p l a n which permits voluntary employee c o n t r i b u t i o n s, the p o r t i o n of a n employee's accrued benefit d e r i v e d from such c o n t r i b u t i o n s shall b e t r e a t e d a s a n accrued benefit derived from employee c o n t r i b u t i o n s under a p l a n other than a defined benefit p l a n. " (6)

ACCRUED B E N E F I T NOT TO BE DECREASED BY AMENDMENT. — A

p l a n s h a l l be t r e a t e d as not s a t i s f y i n g the requirements of t h i s section if the accrued benefit of a part i c i p a n t is deci-eased by a n amendment of the p l a n, other than a n amendment described i n section 4 1 2 (c)(8). "(e)

Post. p. 925. Ante, p. 898.

APPLICATION OF V E S T I N G STANDARDS TO CERTAIN P L A N S. —

" (1) The provisions of t h i s section ( other than paragraph (2)) shall not a p p l y to — " (A) a government a l p l a n ( w i t h i n the m e a n i n g of section 414(d)), " (B) a c h u r c h p l a n ( w i t h i n the m e a n i n g of section 4 1 4 (e)) ^ ^ ^ j ^ rcspcct to which the election provided by section 4 1 0 (d) has not been m a d e.

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PUBLIC LAW 93-406-SEPT. 2, 1974

" (C) a plan which has not, at any time after the date of the enactment of the Employee Retirement Income Security Act of 1974, provided for employer contributions, and " (D) a plan established and maintained by a society, order, or association described in section 501(c)(8) or (9), if no part of the contributions to or under such plan are made by employers of participants in such plan. "(2) A plan described in paragraph (1) shall be treated as meeting the requirements of this section, for purposes of section 401(a), if such plan meets the vesting requirements resulting from the application of sections 401(a)(4) and 401(a)(7) as in effect on the day before the date of the enactment of the Employee Retirement Income Security Act of 1974." (b) COMPARABILITY OF PLANS.—Section 401(a) (relating to requirements for qualification) is amended by adding at the end of paragraph (5) the following: "For purposes of determining whether two or more plans of an employer satisfy the requirements of paragraph (4) when considered as a single plan, if the amount of contributions on behalf of the employees allowed as a deduction under section 404 for the taxable year with respect to such plans, taken together, bears a uniform relationship to the total compensation, or the basic or regular rate of compensation, of such employees, the plans shall not be considered discriminatory merely because the rights of employees to, or derived from, the employer contributions under the separate plans do not become nonforfeitable at the same rate. For the purposes of determining whether two or more plans of an employer satisfy the requirements of paragraph (4) when considered as a single plan, if the employees' rights to benefits under the separate plans do not become nonforfeitable at the same rate, but the levels of benefits provided by the separate plans satisfy the requirements of regulations prescribed by the Secretary or his delegate to take account of the differences in such rates, the plans shall not be considered discriminatory merely because of the difference in such rates." (c)

VARIATIONS FROM CERTAIN VESTING AND ACCRUED BENEFITS

913

26 USC soi.

Post, p. 938. 26 USC 401.

26 USC 411

REQUIREMENTS.—In the case of any plan maintained on January 1, "°*^' 1974, if, not later than 2 years after the date of the enactment of this Act, the plan administrator petitions the Secretary of Labor, the Secretary of Labor may prescribe an alternate method which shall be treated as satisfying the requirements of subsection (a)(2) of section 411 of the Internal Revenue Code of 1954, or of subsection (b)(1) ^"'^' P- ^°^(other than subparagraph (D) thereof) of such section 411, or of both such provisions for a period of not more than 4 years. The Secretary may prescribe such alternate method only when 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 sybstantial 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 412(d) ^°^'' ^' ^^'*" or (e) would be inadequate. I n 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 plan administrator petitions the Secretary of Labor 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.

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PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

SEC. 1013. MINIMUM FUNDING STANDARDS.

(a) IN GENERAL.—Subpart B of part I of subchapter D of chapter 1 is amended by adding after section 411 the following new section: 26 USC 4 1 2.

26 USC 4 0 1,

Post, p p. 969, 991. 26 USC 4 0 5.

"Accumulated funding deficiency." Post, p. 9 2 0.

"SEC. 412. MINIMUM FUNDING STANDARDS, " (a) GENERAL RULE.—Except as provided in subsection (h), this

section applies to a plan if, for any plan year beginning on or after the effective date of this section for such plan— "(1) such plan included a trust which qualified (or was determined by the Secretary or his delegate to have qualified) under section 401(a), or "(2) such plan satisfied (or was determined by the Secretary or his delegate to have satisfied) the requirements of section 403 (a) or 405(a). A plan to which this section applies shall have satisfied the 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. For purposes of this section and section 4971, the term 'accumulated funding deficiency' means for any plan the excess of the total charges to the funding standard account for all plan years (beginning with the first plan year to which this section applies) over the total credits to such account for such years or, if less, the excess of the total charges to the alternative minimum funding standard account for such plan years over the total credits to such account for such years. "(b)

FUNDING STANDARD ACCOUNT.— "(1) ACCOUNT REQUIRED.—Each plan to which this section

applies shall establish and maintain a funding standard account. Such account shall be credited and charged solely as provided in this section. "(2) CHARGES TO ACCOUNT.—For a plan year, the funding standard account shall be charged with the sum of— " (A) the normal cost of the plan for the plan year, " (B) the amounts necessary to amortize m equal annual installments (until fully amortized) — " (i) in the case of a plan in existence on January 1, 1974, the unfunded past service liability under the plan on the first day of the first plan year to which this section applies, over a period of 40 plan years, "(ii) in the case of a plan which comes into existence ' after January 1, 1974, the unfunded past service liability under the plan on the first day of the first plan year to which this section applies, over a period of 30 plan years (40 plan years in the case of a multiemployer plan), "(iii) separately, with respect to each plan year, the net increase (if any) in unfunded past service liability under the plan arising from plan amendments adopted in such year, over a period of 30 plan years (40 plan years in the case of a multiemployer plan), "(iv) separately, with respect to each plan year, the net experience loss (if any) under the plan, over a period of 15 plan years (20 plan years in the case of a multiemployer plan), and " (v) separately, with respect to each plan year, the net loss (if any) resulting from changes in actuarial assumptions used under the plan, over a period of 30 plan years, " (C) the amount necessary to amortize each waived funding deficiency (within the meaning of subsection (d)(3)) for each prior plan year in equal annual installments (until fully amortized) over a period of 15 plan years, and

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PUBLIC LAW 93-406-SEPT. 2, 1974

" (D) the amount necessary to amortize in equal annual installments (until fully amortized) over a period of 5 plan years any amount credited to the funding standard account under paragraph (3)(D). "(3) CREDITS TO ACCOUNT.—For a plan year, the funding standard account shall be credited with the sum of— " (A) the amount considered contributed by the employer to or under the plan for the plan year, " (B) the amount necessary to amortize in equal annual installments (until fully amortized)— " (i) separately, with respect to each plan year, the net decrease (if any) in unfunded past service liability under the plan arising from plan amendments adopted in such year, over a period of 30 plan years (40 plan years in the case of a multiemployer plan), "(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 gam (if any) resulting from changes in actuarial assumptions used under the plan, over a period of 30 plan years, " (C) the amount of the waived funding deficiency (within the meaning of subsection (d)(3) for the plan year, and " (D) in the case of a plan year for which the accumulated funding deficiency is determined under the funding standard account if such plan year follows a plan year for which such deficiency was determined under the alternative minimum funding standard, the excess (if any) of any debit balance in the funding standard account (determined without regard to this subparagraph) over any debit balance in the alternative minimum funding standard account. "(4)

COMBINING AND OFFSETTING AMOUNTS TO BE AMORTIZED,—

Under regulations prescribed by the Secretary or his delegate, amounts required to be amortized under paragraph (2) or paragraph (3), as the case may be—• " (A) may be combined into one amount under such paragraph to be amortized over a period determined on the basis of the remaining amortization period for all items entering into such combined amount, and " (B) may be offset against amounts required to be amortized under the other such paragraph, with the resulting amount to be amortized over a period determined on the basis of the remaining amortization periods for all items entering into whichever of the two amounts being offset is the greater. "(5) INTEREST.—The funding standard account (and items therein) shall be charged or credited (as determined under regulations prescribed by the Secretary or his delegate) with interest at the appropriate rate consistent with the rate or rates of interest used under the plan to determine costs. " (c)

SPECIAL RUUES.— "(1) DETERMINATIONS TO BE MADE UNDER FUNDING METHOD,—

For purposes of this section, normal costs, accrued liability, past service liabilities, and experience gains and losses shall be determined under the funding method used to determine costs under the plan.

915

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PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

" (2) VALUATION OF ASSETS.—

" (A) IN GENERAL.—For purposes of this section, the value of the plan's assets shall be determined on the basis of any reasonable actuarial method of valuation which takes into account fair market value and which is permitted under regulations prescribed by the Secretary or his delegate. " (B) ELECTION WITH RESPECT TO BONDS.—The value of a bond or other evidence of indebtedness which is not in default as to principal or interest may, at the election of the plan administrator, be determined on an amortized basis running from initial cost at purchase to par value at maturity or earliest call date. Any election under this subparagraph shall be made at such time and in such manner as the Secretary or his delegate shall by regulations provide, shall apply to all such evidences of indebtedness, and may be revoked only with the consent of the Secretary or his delegate. " (3) ACTUARIAL

ASSUMPTIONS

MUST

BE REASONABLE.—For

purposes of this section, all costs, liabilities, rates of interest, and other factors under the plan shall be determined on the basis of actuarial assumptions and methods which, in the aggregate, are reasonable (taking into account the experience of the plan and reasonable expectations) and which, in combination, offer the actuary's best estimate of anticipated experience under the plan. " (4) TREATMENT OF CERTAIN CHANGES AS EXPERIENCE GAIN 42 USC 1305.

26 USC 3121. 26 USC 401.

OR LOSS.—For purposes of this section, if— " (A) a change in benefits under the Social Security Act or in other retirement benefits created under Federal or State law, or " (B) a change in the definition of the term 'wages' under section 3121, or a change in the amount of such wages taken into account under regulations prescribed for purposes of section 401(a)(5), results in an increase or decrease in accrued liability under a plan, such increase or decrease shall be treated as an experience loss or gain. " (5) CHANGE I N FUNDING METHOD OR I N PLAN YEAR REQUIRES

APPROVAL.—If the funcing method for a plan is changed, the new funding method shall become the funding method used to determine costs and liabilities under the plan only if the change is approved by the Secretary or his delegate. I f the plan year for a plan is changed, the new plan year shall become the plan year for the plan only if the change is approved by the Secretary or his delegate. "(6) F U L L FUNDING.—If, as of the close of a plan year, a plan would (without regard to this paragraph) have an accumulated funding deficiency (determined without regard to the alternative minimum funding standard account permitted under subsection (g)) in excess of the full funding limitation— "(j^) the funding standard account shall be credited with the amount of such excess, and " (B) all amounts described in paragraphs (2)(B), (C), and (D) and (3)(B) of subsection (b) which are required to be amortized shall be considered fully amortized for purposes of such paragraphs. " (7) F U L L FUNDING LIMITATION.—For purposes of paragraph

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917

(6), the term 'full funding limitation' means the excess (if any) of— " (A) the accrued liability (including normal cost) under the plan (determined under the entry age normal funding method if such accrued liability cannot be directly calculated under the funding method used for the plan), over " (B) the lesser of the fair market value of the plan's assets or the value of such assets determined under paragraph (2). "(8)

CERTAIN RETROACTIVE PLAN AMENDMENTS.—For purposes

of this section, any amendment applying to a plan year which— " (A) is adopted after the close of such plan year but no later than 2 and one-half months after the close of the plan year (or, in the case of a multiemployer plan, no later than 2 years after the close of such plan year), " (B) does not reduce the accrued benefit of any participant determined as of the beginning of the first plan year to which the amendment applies, and " (C) does not reduce the accrued benefit of any participant determined as of the time of adoption except to the extent required by the circumstances, shall, at the election of the plan administrator, be deemed to have been made on the first day of such plan year. No amendment 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 of Labor notifying him of such amendment and the Secretary of Labor has approved such amendment, or within 90 days after the date on which such notice was filed, failed to disapprove such amendment. No amendment described in this subsection shall be approved by the Secretary of Labor unless he determines that such amendment is necessary because of a substantial business hardship (as determined under subsection (d)(2)) and that a waiver under subsection (d)(1) is unavailable or inadequate. "(9) 3-YEAR VALUATION.—FoT purposes of this section, a determination of experience gains and losses and a valuation of the plan's liability shall be made not less frequently than once every 3 years, except that such determination shall be made more frequently to the extent required in particular cases under regulations prescribed by the Secretary or his delegate, "(10)

T I M E WHEN CERTAIN CONTRIBUTIONS DEEMED MADE.—

For purposes of this section, any contributions for a plan year made by an employer after the last day of such plan year, but not later than two and one-half months after such day, shall be deemed to have been made on such last day. For purposes of this paragraph, such two and one-half month period may be extended for not more than six months under regulations prescribed by the Secretary or his delegate. "(d)

VARIANCE FROM MINIMUM FUNDING STANDARD.— "(1) WAIVER IN CASE OF SUBSTANTIAL BUSINESS HARDSHIP.—

If a employer or in the case of a multiemployer plan, 10 percent or more of the number of employers contributing to or under the plan, are unable to satisfy the minimum funding standard for a plan year without substantial business hardship and if application of the standard would be adverse to the interests of plan participants in the aggregate, the Secretary or his delegate may waive the requirements of subsection (a) for such year with respect to all or any portion of the minimum funding standard other than the portion thereof determined under subsection (b) (2)(C). The Secretary or his delegate shall not waive the mini-

38-194 O - 76 - 61 Pt. 1

Notification of amendment.

Approval.

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PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

mum funding standard with respect to a plan for more than 5 of any 15 consecutive plan years. "(2)

Ante, p. 829.

DETERMINATION OF SUBSTANTIAL BUSINESS HARDSHIP.—

For purposes of this section, the factors taken into account in determining substantial business hardship shall include (but shall not be limited to) whether or not— " (A) the employer is operating at an economic loss, " (B) there is substantial unemployment or underemployment in the trade pr business and in the industry concerned, "(C) the sales and profits of the industry concerned are depressed or declining,^ and " (D) it is reasonable to expect that the plan will be continued only if the waiver is granted. "(3) WAIVED FUNDING DEFICIENCY.—For purposes of this section, the term 'waived funding deficiency' means the portion of the minimum funding standard (determined without regard to subsection (b)(3)(C)) for a plan year waived by the Secretary or his delegate and not satisfied by employer contributions. "(e) EXTENSION OF AMORTIZATION PERIODS.—The period of years required to amortize any unfunded liability (described in any clause of subsection (b)(2)(B)) of any plan may be extended by the Secretary of Labor for a period of time (not in excess of 10 years) if he determines that such extension would carry out the purposes of the Employee Retirement Income Security Act of 1974 and would provide adequate protection for participants under the plan and their beneficiaries and if he determines that the failure to permit such extension would— "(1) result in— " (A) a substantial risk to the voluntary continuation of the plan, or " (B) a substantial curtailment of pension benefit levels or employee compensation, and "(2) be adverse to the interests of plan participants in the aggregate. " (f) BENEFITS MAY NOT B E INCREASED DURING WAIVER OR EXTENSION PERIOD.—

"(1) IN GENERAL.—No amendment of the plan which increases the liabilities of the plan by reason of any increase in benefits, any change in the accrual of benefits, or any change in the rate at which benefits become nonforfeitable under the plan shall be adopted if a waiver under subsection (d)(1) or an extension of time under subsection (e) is in effect with respect to the plan, or if a plan amendment described in subsection (c)(8) has been made at any time in the preceding 12 months (24 months for multiemployer plans). If a plan is amended in violation of the preceding sentence, any such waiver or extension of time shall not apply to any plan year ending on or after the date on which such amendment is adopted. "(2) EXCEPTION.—Paragraph (1) shall not apply to any plan amendment which— " (A) the Secretary of Labor determines to be reasonable and which provides for only de minimis increases in the liabilities of the plan, " (B) only repeals an amendment described in subsection (c)(8), or " (C) is required as a condition of qualification under this part.

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919

" (g) ALTERNATIVE MINIMUM FUNDING STANDARD.—

"(1) IN GENERAL.—A plan which uses a funding method that requires contributions in all years not less than those required under the entry age normal funding method may maintain an alternative minimum funding standard account for any plan year. Such account shall be credited and charged solely as provided in this subsection. "(2) CHARGES AND CREDITS TO ACCOUNT.—For a plan year the alternative minimum funding standard account shall be— " (A) charged with the sum of— "(i) the lesser of normal cost under the funding method used under the plan or normal cost determined under the unit credit method, "(ii) the excess, if any, of the present value of accrued benefits under the plan over the fair market value of the assets, and " (iii) an amount equal to the excess (if any) of credits to the alternative minimum standard account for all prior plan years over charges to such account for all such years, and " (B) credited with the amount considered contributed by the employer to or under the plan for the plan year. "(3) SPECIAL RULES.—The alternative minimum funding standard account (and items therein) shall be charged or credited with interest in the manner provided under subsection (b)(5) with respect to the funding standard account. " (h) EXCEPTIONS.—This section shall not apply to— " (1 ^ any profit-sharing or stock bonus plan, "(2) any insurance contract plan described in subsection (i), "(3) any governmental plan (within the meaning of section 414(d)), "(4) any church plan (within the meaning of section 414(e)) with respect to which the election provided by section 410(d) has not been made, "(5) any plan which has not, at any time after the date of the enactment of the Employee Retirement Income Security Act of 1974, provided for employer contributions, or "(6) any plan established and maintained by a society, order, or association described in section 501(c)(8) or (9), if no part of the contributions to or under such plan are made by employers of participants in such plan. No plan described in paragraph (3), (4), or (6) shall be treated as a qualified plan for purposes of section 401(a) unless such plan meets the requirements of section 401(a)(7) as in effect on the day before the date of the enactment of the Employee Retirement Income Security Act of 1974. " (i) CERTAIN INSURANCE CONTRACT PLANS.—A plan is described in this subsection if— " (1) the plan is funded exclusively by the purchase of individual insurance contracts, "(2) such contracts provide for level annual premium payments to be paid extending not later than the retirement age for each individual participating in the plan, and commencing with the date the individual became a participant in the plan (or, in the case of an increase in benefits, commencing at the time such increase becomes effective),

P o s t, p. 92 5.

^"'e, p. 898.

^"'^' P- ^29. 26 USC soi.

26 USC 40i.

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PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

"(3) benefits provided by the plan are equal to the benefits provided under each contract at normal retirement age under the plan and are guaranteed by an insurance carrier (licensed under the laws of a State to do business with the plan) to the extent premiums have been paid, "(4) premiums payable for the plan year, and all prior plan years, under such contracts have been paid before lapse or there is reinstatement of the policy, " (5) no rights under such contracts have been subject to a security interest at any time during the plan year, and "(6) no policy loans are outstanding at any time during the plan year. A plan funded exclusively by the purchase of group insurance contracts which is determined under regulations prescribed by the Secretary or his delegate to have the same characteristics as contracts described in the preceding sentence shall be treated as a plan described in this subsection." (b)

EXCISE TAX ON FAILURE To MEET MINIMUM FUNDING STAND-

ARDS.—Subtitle D (relating to miscellaneous excise taxes) is amended by adding at the end thereof the following new chapter: "CHAPTER 43—QUAHFIED PENSION, ETC., PLANS "Sec. 4971. Taxes on failure to meet minimum funding standards. 26 USC 4971.

"SEC. 4971. TAXES ON FAILURE TO MEET MINIMUM FUNDING STANDARDS. " (a) INITIAL TAX.—For each taxable year of an employer who

Ante, p. 914.

maintains a plan to which section 412 applies, there is hereby imposed a tax of 5 percent on the amount of the accumulated funding deficiency under the plan, determined as of the end of the plan year ending with or within such taxable year. The tax imposed by this subsection shall be paid by the employer responsible for contributing to or under the plan the amount described in section 412(b)(3)(A). "(b) ADDITIONAL TAX.—In any case in which an initial tax is imposed by subsection (a) on an accumulated funding deficiency and such accumulated funding deficiency is not corrected within the correction period, there is hereby imposed a tax equal to 100 percent of such accumulated funding deficiency to the extent not corrected. The tax imposed by this subsection shall be paid by the employer described in subsection (a). " (c) DEFINITIONS.—For purposes of this section— "(1) ACCUMULATED FUNDING DEFICIENCY.—The term 'accumulated funding deficiency' has the meaning given to such term by the last sentence of section 412(a). "(2) CORRECT.—The term 'correct' means, with respect to an accumulated funding deficiency, the contribution, to or under the plan, of the amount necessary to reduce such accumulated funding deficiency as of the end of a plan year in which such deficiency arose to zero. "(3) CORRECTION PERIOD.—The term 'correction period' means, with respect to an accumulated funding deficiency, the period beginning with the end of a plan year in which there is an accumulated funding deficiency and ending 90 days after the date of mailjjjg of a notice of deficiency under section 6212 with respect to the tax imposed by subsection (b),extended— " (A) by any period in which a deficiency cannot be assessed undersection 6213(a), and

V 26 USC 6212. 26 USC 6213.

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921

" (B) by any other period which the Secretary or his delegate determines is reasonable and necessary to permit a reduction of the accumulated funding deficiency to zero under this section. " (d) NOTIFICATION OF THE SECRETARY OF LABOR.—Before issuing a notice of deficiency with respect to the tax imposed by subsection (a) or (b), the Secretary or his delegate shall notify the Secretary of Labor and provide him a reasonable opportunity (but not more than 60 days)— "(1) to require the employer responsible for contributing to or under the plan to eliminate the accumulated funding deficiency, or " (2) to comment on the imposition of such tax. " (e) CROSS REFERENCES.—

"For disallowance of deduction for taxes paid under this section, see section 275. "For liability for tax in case of an employer party to collective bargaining agreement, see section 413(b)(6). "For provisions concerning notification of Secretary of Labor of imposition of tax under this section, waiver of the tax imposed by subsection (b), and other coordination between Secretary of the Treasury and Secretary of Labor with respect to compliance with this section, see section 3002(b) of title III of the Employee Retirement Income Security Act of 1974.". (c) AMENDMENTS TO SECTION 404.— (1) Paragraph (1) of section 404(a) (relating to deduction for employer contributions to pension trusts) is amended to read as follows:

^^ "^^ '*°'*-

" (1) PENSION TRUSTS.

" (A) IN GENERAL.—In the taxable year when paid, if the contributions are paid into a pension trust, and if such taxable year ends within or with a taxable year of the trust for which the trust is exempt under section 501(a), in an 26 USC soi. amount determined as follows: " (i) the amount necessary to satisfy the minimum funding standard provided by section 412(a) for plan Ante, p. 9i4. years ending within or with such taxable year (or for any prior plan year), if such amount is greater than the amount determined under clause (ii) or (iii) (whichever is applicable with respect to the plan), "(ii) the amount necessary to provide with respect to all of the employees under the trust the remaining unfunded cost of their past and current service credits distributed as a level amount, or a level percentage of compensation, over the remaining future service of each such employee, as determined under regulations prescribed by the Secretary or his delegate, but if such remaining unfunded cost with respect to any 3 individuals is more than 50 percent of such remaining unfunded cost, the amount of such unfunded cost attributable to such individuals shall be distributed over a period of at least 5 taxable years. "(iii) an amount equal to the normal cost of the plan, as determined under regulations prescribed by the Secretary or his delegate, plus, if past service or other supplementary pension or annuity credits are provided by the plan, an amount necessary to amortize such credits in equal annual payments (until fully amortized) over 10 years, as determined under regulations prescribed by the Secretary or his delegate. In determining the amount deductible in such year under the foregoing limitations the funding method and the actuarial assumptions used shall be those used for such year under

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Page:United States Statutes at Large Volume 88 Part 1.djvu/966

 922 Ante, p. 914.

PUBLIC LAW 93-406-SEPT. 2, 1974

sGction 412, and the maximum amomit deductible for such year shall be an amount equal to the full funding limitation for such year determined under section 412. "(B)

26 USC 167.

42 USC 401. '1^°""^°"^'^

group

26 USC 1563.

[88 STAT.

SPECIAL RULE IN CASE or CERTAIN AMENDMENTS.—In

the case of a plan which the Secretary of Labor finds to be collectively bargained which makes an election under this subparagraph (in such manner and at such time as may be provided under regulations prescribed by the Secretary or his delegate), if the full funding limitation determined under section 412(c)(7) for such year is zero, if as a result of any plan amendment applying to such plan year, the amount determined under section 412(c)(7)(B) exceeds the amount determined under section 412(c)(7)(A), and if the funding method and the actuarial assumptions used are those used for such year under section 412, the maximum amount deductible in such year under the limitations of this paragraph shall be an amount equal to the lesser of— " (i) the full funding limitation for such year determined by applying section 412(c)(7) but increasing the amount referred to in subparagraph (A) thereof by the decrease in the present value of all unamortized liabilities resulting from such amendment, or "(ii) the normal cost under the plan reduced by the amount necessary to amortize in equal annual installments over 10 years (until fully amortized) the decrease described in clause (i). In the case of any election under this subparagraph, the amount deductible under the limitations of this paragraph with respect to any of the plan years following the plan year for which such election was made shall be determined as provided under such regulations as may be prescribed by the Secretary or his delegate to carry out the purposes of this subparagraph. " (C) CERTAIN COLLECTIVELY-BARGAINED PLANS.—In the case of a plan which the Secretary of Labor finds to be collectively bargained, established or maintained by an employer doing business in not less than 40 States and engaged in the trade or business of furnishing or selling services described in section 167(1)(3)(A) (iii), with respect to which the rates have been established or approved by a State or political subdivision thereof, by any agency or instrumentality of the United States, or by a public service or public utility commission or other similar body of any State or political subdivision thereof, and in the case of any employer which is a member of a controlled group with such employer, subparagraph (B) shall be applied by substituting for the words 'plan amendment' the words 'plan amendment or increase in benefits payable under title II of the Social Security Act'. For purposes of this subparagraph, the term 'controlled group' has the meaning provided by section 1563(a), determined without regard to section 1563(a)(4) and (e)(3)(C). " (D) CARRYOVER.—Any amount paid in a taxable year in excess of the amount deductible in such year under the foregoing limitations shall be deductible in the succeeding taxable years in order of time to the extent of the difference between the amount paid and deductible in each such succeeding year and the maximum amount deductible for such year under the foregoing limitations."

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PUBLIC LAW 93-406-SEPT. 2, 1974

(2) Paragraph (6) of section 404(a) (relating to taxpayers on accrual basis) is amended to read as follows:

923 26 USC 404.

" (6) T I M E WHEN CONTRIBUTIONS DEEMED MADE.—For purposes

of paragraphs (1), (2), and (3), a taxpayer shall be deemed to have made a payment on the last day of the preceding taxable year if the payment is on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof)." (3) Paragraph (7) of section 404(a) (relating to limit on deductions) is amended to read as follows: "(7) L I M I T ON DEDUCTIONS.—If amounts are deductible under paragraphs (1) and (3), or (2) and (3), or (1), (2), and (3), in connection with two or more trusts, or one or more trusts and an annuity plan, the total amount deductible in a taxable year under such trusts and plans shall not exceed the greater of 25 percent of the compensation otherwise paid or accrued during the taxable year to the beneficiaries of the trusts or plans, or the amount of contributions made to or under the trusts or plans to the extent such contributions do not exceed the amount of employer contributions necessary to satisfy the minimum funding standard provided by section 412 for the plan year which ends with or ^"'^» P- ^i^. within such taxable year (or for any prior plan year). I n addition, any amount paid into such trust or under such annuity plans in any taxable year in excess of the amount allowable with respect to such year under the preceding provisions of this paragraph shall be deductible in the succeeding taxable years in order of time, but the amount so deductible under this sentence in any one such succeeding taxable year together with the amount allowable under the first sentence of this paragraph shall not exceed 25 percent of the compensation otherwise paid or accrued during such taxable years to the beneficiaries under the trusts or plans. This paragraph shall not have the effect of reducing the amount otherwise deductible under paragraphs (1), (2), and (3), if no employee is a beneficiary under more than one trust or a trust and an annuity plan." (d) ALTERNATIA^ EMPLOYER P L A N S. —

AMORTIZATION METHOD FOR CERTAIN MULTI- note."^^ ^^^

(1) GENERAL RULE.—In the case of any multiemployer plan (as defined in section 414(f) of the Internal Revenue Code of 1954) to which section 412 of such Code applies, if— (A) on January 1, 1974, the contributions under the plan were based on a percentage of pay, (B) the actuarial assumptions with respect to pay are reasonably related to past and projected experience, and (C) the rates of interest under the plan are determined on the basis of reasonable actuarial assumptions, the plan may elect (in such manner and at such time as may be provided under regulations prescribed by the Secretary of the Treasury or his delegate) to fund the unfunded past service liability under the plan existing as of the date 12 months following the first date on which such section 412 first applies to the plan by charging the funding standard account with an equal annual percentage of the aggregate pay of all participants in the plan in lieu of the level dollar charges to such account required under clauses (i), (ii), and (iii) of section 412(b)(2)(B) of such Code and section 302(b)(2)(B)(i), (ii), and (iii) of this Act. (2) LIMITATION.—In the case of a plan which makes an election under paragraph (1), the aggregate of the charges required under such paragraph for a plan year shall not be less than the interest

^°^*> p- ^25.

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Page:United States Statutes at Large Volume 88 Part 1.djvu/968

 924

Ante, p. 914.

26 USC 413.

P U B L I C LAW 9 3 - 4 0 6 - S E P T. 2, 1974

on the u n f u n d e d p a s t service liabilities described i n clauses (i), ( i i), and ( i i i) of section 4 1 2 (b)(2)(B) of the I n t e r n a l Revenue Code of 1954. SEC. 1014. COLLECTIVELY BARGAINED PLANS, ETC. Subpart B of part I of subchapter D of chapter 1 ( r e l a t i n g to special rules) is amended by inserting after section 412 the following new section: "SEC. 413. COLLECTIVELY BARGAINED PLANS, ETC. "(a)

An<e, p. 898.

ZT:. "om^*' Ante, p. 901,

[88 STAT.

APPLICATION OF S U B S E C T I O N (b). — S u b s e c t i o n (b) a p p l i e s to —

" (1) a p l a n m a i n t a i n e d pursuant to a n a g r e e m e n t which the Secretary of Labor finds to be a collective-bargaining a g r e e m e n t between employee representatives and one o r more employers, and " (2) each t r u s t which i s a part of such p l a n. " (b) GENERAL RULE. — I f t h i s subsection applies to a p l a n, notwithstanding any other provision of t h i s title — " (1) PARTICIPATION.—Section 410 shall bc a p p l i e d a s if a l l employees of each of the e m p l o y e r s w h o a r e part i e s to the collect i v e - b a r g a i n i n g a g r e e m e n t and w h o are subject to the same benefit c o m p u t a t i o n for m u l a under the p l a n were e m p l o y e d by a single employer. " (2) D I S C R I M I N A T I O N, ETC.-Sections 401(a)(4) and 411 (d)(3)

shall be a p p l i e d a s if a l l part i c i p a n t s w h o a r e subject to the same benefit c o m p u t a t i o n for m u l a and who a r e employed by employers w h o a r e part i e s to the collective b a r g a i n i n g a g r e e m e n t w e r e employed by a single employer. "(3)

E X C L U S IV E B E N E F I T. — For purposes of section 4 0 1 (a), i n

determining w h e the r the p l a n of a n employer is for the exclusive benefit of h i s employees and the i r beneficiaries, a l l p l a n part i c i p a n t s shall be considered to be h i s employees. " (4) V E S T I N G. — S e c t i o n 411 ( other than subsection (d)(3)) shall be a p p l i e d as if all employers who h a v e been part i e s to the collective-bargaining a g r e e m e n t constituted a single employer, except that the application of any rules w i t h respect to b r e a k s i n service shall be m a d e under r e g u l a t i o n s prescribed by the Secretary of Labor. " (5) F U N D I N G. — The minimum f u n d i n g standard provided by section 412 shall be determined as if a l l part i c i p a n t s i n the p l a n were employed by a single employer. Ante, p. 920.

" (6) L I A B I L I T Y FOR F U N D I N G T A X. — For a p l a n year the l i a b i l i t y

under section 4971 of each e m p l o y e r w h o is a party to the collective b a r g a i n i n g a g r e e m e n t shall be determined in a reasonable m a n n e r not inconsistent w i t h r e g u l a t i o n s prescribed by the Secretary o r his delegate— " (A) first on the basis of the i r respective delinquencies in m e e t i n g required e m p l o y e r c o n t r i b u t i o n s under the p l a n, and " (B) the n on the basis of the i r respective liabilities for contributions under the plan. " (7)

26 USC 404.

DEDUCTION LIMITATIONS.—Each applicable limitation pro-

vided by section 4 0 4 (a) shall be determined as if all part i c i p a n t s in the p l a n were employed by a single employer. The a m o u n t s c o n t r i b u t e d to o r under the p l a n by each employer who is a party to the agreement, for the p o r t i o n of h i s tax a b l e year which is included w i t h i n such a p l a n year, shall be considered not to exceed such a l i m i t a t i o n if the a n t i c i p a t e d employer c o n t r i b u t i o n s for such p l a n year ( determined in a m a n n e r consistent w i t h the m a n n e r in which actual employer contributions for such p l a n year a r e determined) do not exceed such l i m i t a t i o n. I f such anticipated c o n t r i b u t i o n s exceed such a l i m i t a t i o n, the portion of each such employer's c o n t r i b u t i o n s which is not deductible under section

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925

404 shall be determined in accordance with regulations prescribed ^e use 404. by the Secretary or his delegate. "(8) EMPLOYEES OF LABOR UNIONS.—For purposes of this subsection, employees of employee representatives shall be treated as employees of an employer described in subsection (a)(1) if such representatives meet the requirements of sections 401(a) (4) and 410 with respect to such employees. AntV^' ^898^^' " (c) PLANS MAINTAINED BY MORE T H A N O N E EMPLOYER.—In the

" ^' P-

case of a plan maintained by more than one employer— "(1) PARTICIPATION.—Section 410(a) shall be applied as if all employees of each of the employers who maintain the plan were employed by a single employer, "(2) EXCLUSIVE BENEFIT.—For purposes of section 401(a), in determining whether the plan of an employer is for the exclusive benefit of his employees and their beneficiaries all plan participants shall be considered to be his employees. "(3) VESTING.—Section 411 shall be applied as if all employers ^"'e- P- 9OIwho maintain the plan constituted a single employer, except that the application of any rules with respect to breaks in service shall be made under regulations prescribed hj the Secretary of Labor. " (4) FUNDING.—The minimum funding standard provided by section 412 shall be determined as if all participants in the plan '^"^^' P- ^'^^• were employed by a single employer. " (5) LIABILITY FOR FUNDING TAX.—For a plan year the liability under section 4971 of each employer who maintains the plan shall ^"'^- P- ^20. , be determined in a reasonable manner not inconsistent with regulations prescribed by the Secretary or his delegate— " (A) first on the basis of their respective delinquencies in meeting required employer contributions under the plan, and " (B) then on the basis of their respective liabilities for contributions under the plan. "(6) DEDUCTION LIMITATIONS.—Each applicable limitation provided by section 404(a) shall be determined as if all participants in the plan were employed by a single employer. The amounts contributed to or under the plan by each employer who maintains the plan, for the portion of this taxable year which is included within such a plan year, shall be considered not to exceed such a limitation if the anticipated employer contributions for such plan year (determined in a reasonable manner not inconsistent with regulations prescribed by the Secretary or his delegate) do not exceed such limitation. If such anticipated contributions exceed such a limitation, the portion of each such employer's contributions which is not deductible under section 404 shall be determined in accordance with regulations prescribed by the Secretary or his delegate. Allocations of amounts under paragraphs (4), (5), and (6), among the employers maintaining the plan, shall not be inconsistent with regulations prescribed for this purpose by the Secretary or his delegate." SEC. 1015. DEFINITIONS AND SPECIAL RULES. Subpart B of part I of subchapter D of chapter 1 is amended by inserting after section 413 the following new section: "SEC. 414. DEFINITIONS AND SPECIAL RULES.

" (a) SERVICE FOR PREDECESSOR EMPLOYER.—For purposes of this part—

26 USC 414.

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[88 STAT.

"(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 or his delegate, be treated as service for the employer. "(b)

EMPLOYEES OF CONTROLLED GROUP OF CORPORATIONS.—For

Infef pp^°898, purposes of sectious 401, 410, 411, and 415, all employees of all corpo901; p'os(, p. 979. ratious which are members of a controlled group of corporations (within the meaning of section 1563(a), determined without regard 26 USC 1563. ^Q section 1563(a)(4) and (e)(3)(C)) shall be treated as employed by a single employer. With respect to a plan adopted by more than one such corporation, the minimum funding standard of section 412, the Ante, p. 920. tax imposed by section 4971, and the applicable limitations provided by section 404(a) 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 or his delegate. "(c) EMPLOYISES OF PARTNERSHIPS, PROPRIETORSHIPS, ETC., W H I C H ARE UNDER COMMON CONTROL.—For purposes of sections 401,410,411,

and 415, under regulations prescribed by the Secretary or his delegate, 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 (b). " (d) GOVERNMENTAL P L A N. — For purposes of this part, the term 'governmental plan' means a plan established and maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing. The term 'governmental plan' also includes any plan to which the Railroad Retirement Act of 45 USC 215-228 1935 or 1937 applies and which is financed by contributions required notes, 228a. uudcT that Act aud any plan of an international organization which is exempt from taxation by reason of the International Organiza22 USC 288 tions Immunities Act (59 Stat. 669). note

26 USC 501.

"(e)

CHURCH P L A N. —

"(1) IN GENERAL.—For purposes of this part the term 'church plan' means— " (A) a plan established and maintained for its employees by a church or by a convention or association of churches which is exempt from tax under section 501, or " (B) a plan described in paragraph (3). " (2)

CERTAIN UNRELATED BUSINESS OR MULTIEMPLOYER PLANS.—

The term 'church plan' does not include a plan— " (A) which is established and maintained primarily for the benefit of employees (or their beneficiaries) of such church or convention or association of churches who are employed in connection with one or more unrelated trades or businesses (within the meaning of section 513), or " (B) which is a plan maintained by more than one employer, if one or more of the employers in the plan is not a church (or a convention or association of churches) which is exempt from tax under section 501. "(3) SPECIAL TEMPORARY RULE FOR CERTAIN CHURCH AGENCIES UNDER CHURCH PLAN.

" (A) Notwithstanding the provisions of paragraph (2)(B), a plan in existence on January 1, 1974, shall be

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treated as a church plan if it is established and maintained by a church or convention or association of churches and one or more agencies of such church (or convention or association) for the employees of such church (or convention or association) and the employees of one or more agencies of such church (or convention or association), and if such church (or convention or association) and each such agency is exempt from tax under section 501. " (B) Subparagraph (A) shall not apply to any plan maintained for employees of an agency with respect to which the plan was not maintained on January 1, 1974, " (C) Subparagraph (A) shall not apply with respect to any plan for any plan year beginning after December 31, 1982. "(f)

MULITIEMPLOYER

927

26 USC soi.

PLAN.—

"(1) IN GENERAL.—For purposes of this part, the term 'multiemployer plan' means a plan— " (A) to which more than one employer is required to contribute, " (B) which is maintained pursuant to a collective-bargaining agreement between employee representatives and more than one employer, " (C) under which the amount of contributions made under the plan for a plan year by each employer making such contributions is less than 50 percent of the aggregate amount of contributions made under the plan for that plan year by all employers making such contributions, (D) under which benefits are payable with respect to each participant without regard to the cessation of contributions by the employer who employed that participant except to the extent that such benefits accrued as a result of service with the employer before such employer was required to contribute to such plan, and " (E) which satisfies such other requirements as the Secretary of Labor may by regulations prescribe. " (2) SPECIAL RULES.—For purposes of this subsection— " (A) If a plan is a multiemployer plan within the meaning of paragraph (1) for any plan year, subparagraph (C) of paragraph (1) shall be applied by substituting '75 percent' for '50 percent' for each subsequent plan year until the first plan year following a plan year in which the plan had one employer who made contributions of 75 percent or more of the aggregate amount of contributions made under the plan for that plan year by all employers making such contributions. " (B) All corporations which are members of a controlled group of corporations (within the meaning of section 1563 26 USC isea. (a), determined without regard to section 1563(e)(3)(C)) shall be deemed to be one employer. " (g) P L A N ADMINISTRATOR.—For purposes of this part, the term 'plan administrator' means— "(1) the person specifically so designated by the terms of the instrument under which the plan is operated; "(2) in the absence of a designation referred to in paragraph " (A) in the case of a plan maintained by a single employer, such employer, " (B) in the case of a plan maintained by two or more employers or jointly by one or more employers and one or

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text:
Page:United States Statutes at Large Volume 88 Part 1.djvu/972

 92»'

PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

more employee organizations, the association, committee, joint board, of trustees, or other similar group of representatives of the parties who maintained the plan, or " (C) in any case to which subparagraph (A) or (B) does not apply, such other person as the Secretary or his delegate may by regulation, prescribe. " (h) TAX TREATMENT OF CERTAIN CONTRIBUTIONS.—

26 USC 4 0 1. 26 USC 4 0 3, 405.

"(1) IN GENERAL.—Effective with respect to taxable years beginning after December 31, 1973, for purposes of this title, any amount contributed— " (A) to an employees' trust described in section 401(a), or " (B) under a plan described in section 403(a) or 405(a), shall not be treated as having been made by the employer if it is designated as an employee contribution. " (2) DESIGNATION BY UNITS OF GOVERNMENT.—For purposes

Ante, p. 898. ^"'^' "• ^*Post, p. 979.

Post,

p. 971.

of paragraph (1), in the case of any plan established by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing, where the contributions of employing units are designated as employee contributions but where any employing unit picks up the contributions, the contributions so picked up shall be treated as employer contributions, "(i) DEFINED CONTRIBUTION P L A N. — For purposes of this part, the term 'defined contribution plan' means a plan which provides for an individual account for each participant and for benefits based solely on the amount contributed to the participant's account, and any income, expenses, gains and losses, and any forfeitures of accounts of other participants which may be allocated to such participant's account. "(j) DEFINED BENEFIT P L A N. — For purposes of this part, the term 'defined benefit plan' means any plan which is not a defined contribution plan. "(k) CERTAIN PLANS.—A defined benefit plan which provides a benefit derived from employer contributions which is based partly on the balance of the separate account of a participant shall— u^]^^ ^^j. purposes of section 410 (relating to minimum participation standards), be treated as a defined contribution plan, " (2) for purposes of sections 411(a)(7)(A) (relating to minimum vesting standards) and 415 (relating to limitations on benefits and contributions under qualified plans), be treated as consisting of a defined contribution plan to the extent benefits are based on the separate account of a participant and as a defined benefit plan with respect to the remaining portion of benefits under the plan, and " (3) for purposes of section 4975 (relating to tax on prohibited transactions), be treated as a defined benefit plan. "(1) MERGERS AND CONSOLIDATIONS OF PLANS OR TRANSFERS OF PLAN ASSETS.—A trust which forms a part of a plan shall not con-

Ante,

p. 829.

stitute a qualified trust under section 401 and a plan shall be treated as not described in section 403(a) or 405 unless in the case of any merger or consolidation of the plan with, or in the case of any transfer of assets or liabilities of such plan to, any other trust plan after the date of t] e enactment of the Employee Ketirement Income Security Act of 1974, 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

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text:
Page:United States Statutes at Large Volume 88 Part 1.djvu/973

 88 STAT. ]

PUBLIC LAW 93-406-SEPT. 2, 1974

929

shall apply in the case of a multiemployer plan only to the extent determined by the Pension Benefit Guaranty Corporation." SEC. 1016. CONFORMING AND CLERICAL AMENDMENTS. (a) CONFORMING AMENDMENTS.—

(1) Section 2Y5(a) (relating to denial of deduction for certain taxes) is amended by adding at the end thereof the following new paragraph: " (6) Taxes imposed by chapter 42 and chapter 43." ^ (2) Section 401(a) (relating to requirements for qualification) is amended— (A) by striking out paragraph (3) and inserting in lieu thereof: "(3) if the plan of which such trust is a part satisfies the requirements of section 410 (relating to minimum participation standards); and", (B) by striking out "paragraph (3)(B) or (4) " in paragraph (5) and inserting in lieu thereof "paragraph (4) or section 410(b) (without regard to paragraph (1)(A) thereof)", and (C) by striking out paragraph (7) and inserting in lieu thereof: "(7) A trust shall not constitute a qualified tnist under this section unless the plan of which such trust is a part satisfies the requirements of section 411 (relating to minimum vesting standards)." (3) Section 404(a)(2) (relating to deduction for contributions of an employer to an employee's annuity plan) is amended by striking out "and (8)," and inserting in lieu thereof " (8), (11), (12),(13),.(14).and(15)". _ _ (4) Section 406(b)(1) (relating to certain employees of foreign subsidiaries) is amended by striking out "paragraphs (3)(B) and (4) of section 401(a)" and inserting in lieu thereof "section 401(a)(4) and section 410(b) (without regard to paragraph (1)(A) thereof)". (5) Section 407(b)(1) (relating to certain employees of domestic subsidiaries engaged in business outside the United States) is amended by striking out "paragraph (3)(B) and (4) of section 401(a)" and inserting in lieu thereof "section 401(a)(4) and section 410(b) (without regard to paragraph (1)(A) thereof)". (6) Section 805(d)(1)(C) (relating to definition of pension plan reserves) is amended by striking out "and (8) " and inserting in lieu thereof " (8), (11), (12), (13), (14), and (15)". (7) Section 6161(b)(1) (relating to extensions of time for paying tax) is amended by striking out "or 42" and inserting in lieu thereof "42 or 43". The second sentence of section 6161(b) is amended by striking out "or 42" and inserting in lieu thereof ", 42, or chapter 43". (8) Section 6201(d) (relating to assessment authority) is amended by striking out "and chapter 42" and inserting in lieu thereof ", chapter 42, and chapter 43". (9) Section 6211 (defining deficiency) is amended— (A) by striking out so much of subsection (a) as precedes paragraph (1) thereof and inserting in lieu thereof the following: " (a) IN GENERAL.—For purposes of this title in the case of income, estate, and gift taxes imposed by subtitles A and B and excise taxes imposed by chapters 42 and 43, the term 'deficiency' means the amount

26 USC 275. ^^^ use 4940. 26 USC"401.*

Ante,

p. 898.

^" P- ^oi26 USC 404. ,,...,„. ^f'use 4U6. ^°«''?• ^ss. 26 USC 407.

^6 USC 805. ^e use eiei.

26 USC 6201, 26 USC 6211,

26 USC 1, 2001.

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text:
Page:United States Statutes at Large Volume 88 Part 1.djvu/974

 930 200^1 ^4^940.' Ante, p. 920. 26 USC 6212.

PUBLIC LAW 9 3 - 4 0 6 - S E P T. 2, 1974

^y "^hich the tax imposed by subtitle A or B, or chapter 42 or 43, cxcecds the excess of—"; and (B) by striking out "chapter 42'* in subsection (b)(2) and inserting in lieu thereof "chapter 42 or 43". ^-^Q^ Section 6212 (relating to notice of deficiency) is amended— (A) by striking out "chapter 42" in subsection (a) and inserting in lieu thereof "chapter 42 or 43", (B) by striking out "or chapter 42" in subsection (b)(1) and inserting in lieu thereof "chapter 42, or chapter 43", (C) by striking out "chapter 42, and this chapter" in subsection (b)(1) and inserting in lieu thereof "chapter 42, chapter 43, and this chapter", and (D) by striking out "of the same decedent," in subsection (c) and inserting in lieu thereof "of the same decedent, of chapter 43 tax for the same taxable years,". (11) Section 6213 (relating to restrictions applicable to deficiencies and petition to Tax Court) is amended— (A) by striking out "or chapter 42" in subsection (a) and inserting in lieu thereof ", chapter 42 or 43", (B) by striking out the heading of subsection (e) and inserting in lieu thereof: "(e)

^"'^'^•^20. Post, p. 971.

26 USC 6344.

26 USC 6501,

26 USC 6503.

26 USC 6512. 26 USC 6601.

[88 STAT.

SUSPENSION or F I L I N G PERIOD FOR CERTAIN EXCISE TAXES.—",

(C) by striking out "or 4945 (relating to taxes on taxable expenditures)" in subsection (e) and inserting in lieu thereof "4945 (relating to taxes on taxable expenditures), 4971 (relating to excise taxes on failure to meet minimum funding standard), 4975 (relating to excise taxes on prohibited transactions)"; and (D) by striking out "or 4945 (h)(2) " in subsection (e) and inserting in lieu thereof ", 4945(1)(2), 4971(c)(3), or 4975 (f)(4)/'. . . (12) Section 6214 (relating to determinations by Tax Court) is amended— (A) by amending the heading of subsection (c) to read as follows: "(c) TAXES IMPOSED BY SECTION 507 OR CHAPTER 42 OR 43.—", (B) by inserting after "chapter 42" each place it appears in subsection (c) "or 43"; and (C) by striking out "chapter 42" in subsection (d) and inserting in lieu thiBreof "chapter 42 or 43". (13) Section 6344(a)(1) (relating to cross references) is amended by striking out "chapter 42" and inserting in lieu thereof "chapter 42 or 43". (14) Section 6501(e)(3) (relating to limitations on assessment and collection) is amended by striking out "chapter 42" and inserting in lieu thereof "chapter 42 or 43". ^ j^g^ Section 6503 (relating to suspension of running of period of limitations) is amended— (A) by striking out "chapter 42 taxes)" in subsection (a) (1) and inserting in lieu thereof "certain excise taxes)", and (B) by inserting after "section 507" in subsection (h) "or section 4971 or section 4975", and by striking out "or 4945(h) (2)" in subsection (h) and inserting in lieu thereof "4945 (i) (2),4971(c)(3),or4975(f)(4)"._ (16) Section 6512 (relating to limitations in case of petition to Tax Court) is amended by striking out "chapter 42" each place it appears therein and inserting in lieu thereof "chapter 42 or 43". (17) Section 6601(d) (relating to interest on underpayment,

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text:
Page:United States Statutes at Large Volume 88 Part 1.djvu/975

 88 STAT. ]

PUBLIC LAW 9 3 - 4 0 6 - S E P T. 2, 1974

^>31

nonpayment, or extensions of time for payment of tax) is amended by— (A) striking out in the heading thereof "CHAPTER 42" and inserting in lieu thereof "CHAPTER 42 OR 43", and 26 USC 494o. (B) striking out "chapter 42" and inserting in lieu thereof "'^' ^' ^^°' "certain excise". (18) Section 6653(c)(1) (relating to income, estate, gift, and 26 USC 6653, chapter 42 taxes) is amended by striking out "chapter 42" each place it appears therein (including the heading) and inserting in lieu thereof "certain excise". (19) Section 6659(b) (relating to applicable rules) is amended 26 USC 6659, by striking out "chapter 42" and inserting in lieu thereof "certain excise". (20) Section 6676(b) (relating to failure to supply identify26 USC 6676. ing numbers) is amended by striking out "chapter 42" and inserting in lieu thereof "and certain excise". (21) Section 6677(b) (relating to failure to file information 26 USC 6677, returns with respect to certain foreign trusts) is amended by striking out "chapter 42" and inserting in lieu thereof "and certain excise". (22) Section 6679(b) (relating to failure to file returns as to 26 USC 6679. organization or reorganization of foreign corporations and as to acquisitions of their stock) is amended by striking out "chapter 42" and inserting in lieu thereof "and certain excise". (23) Section 6682(b) (relating to false information with 26 USC 6682. respect to withholding allowances based on itemized deductions) is amended by striking out "chapter 42" and inserting in lieu thereof "and certain excise". (24) The heading of section 6861 (relating to jeopardy assess- ^^ ^^^ ^^^^• ments of income, estate, and gift taxes) is amended by striking out "and gift taxes.", and inserting in lieu thereof ", gift, and certain excise taxes.". (25) Section 6862 (relating to jeopardy assessment of taxes 26 USC 6862. other than income, estate, and gift taxes) is amended— (A) by striking out "and Gift Taxes.", in the heading and inserting in lieu thereof ", Gift, and Certain Excise Taxes.", (B) by striking out "and gift tax) " in subsection (a) and inserting in lieu thereof "gift tax, and certain excise taxes)". (26) Section 7422 (relating to civil actions for refund) is 26 USC 7422. amended— (A) by striking out "chapter 42" and inserting in lieu thereof "chapter 42 or 43" in subsection (e), (B) by striking out "CHAPTER 42" in the heading of subsection (g) and inserting in lieu thereof "CHAPTER 42 or 43", (C) by striking out "or 4945" in subsection (g)(1) and inserting in lieu thereof "4945, 4971, or 4975", ILYf p.\^20;: (D) by striking out "section 4945(a) (relating to initial ^ost, p. 971. taxes on taxable expenditures)" in subsection (g)(1) and inserting in lieu thereof "section 4945(a) (relating to initial taxes on taxable expenditures), 4971(a) (relating to initial tax on failure to meet minimum funding standard), 4975(a) (relating to initial tax on prohibited transactions)", (E) by striking out "or section 4945(b) (relating to additional taxes on taxable expenditures)" in subsection (g) (1) and inserting in lieu thereof "section 4945(b) (relating to additional taxes on taxable expenditures), section 4971(b) (relating to additional tax on failure to meet minimum fund-

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text:
Page:The Eurypterida of New York Volume 1.pdf/89

 great exterior similarity of the eurypterids and ostracophores and the explanation of this phenomenon as resulting from adaptation to like conditions. The ostracophores have been generally regarded by paleontologists as owing their peculiar form to their mud-grubbing habit, and it may be inferred that the eurypterids, being of similar form, were of like habit and perhaps of like form because of similar habit.

In this chapter we shall first survey the geological distribution of the eurypterids in North America as indicated by the following conspectus, compare this distribution with that in Europe, and finally attempt a conclusion as to the physical conditions under which these strange creatures lived.

Beltina danai Walcott. Greyson shales, Montana

Strabops thacheri Beecher. Potosi limestone, St François county, Missouri


text:
Page:United States Statutes at Large Volume 88 Part 1.djvu/976

 932

26 USC 4945. Pos"/p.^97i. ' 26 USC 6204.

PUBLIC LAW 9 3 - 4 0 6 - S E P T. 2, 1974

[88 STAT.

i n g standard), o r section 4975(b) ( r e l a t i n g to a d d i t i o n a l tax o n p r o h i b i t e d t r a n s a c t i o n s) ", and. (F) by striking o u t " o r 4945" i n paragraph s (2) and (3) of subsection (g) and inserting i n lieu the r e o f "4945, 4971, o r 4975". (27) Section 6204(b) ( r e l a t i n g to s u p p l e m e n t a l assessments) is amended by striking o u t " and g i f t tax e s " and inserting i n lieu thereof "gift, and certain excise tax e s ", (b)

CLERICAL AMENDMENTS. —

(1) Part I of subchapter D of chapter 1 is amended by inserting after the heading and before the table of sections the following: "Subpart A. General rule. "Subpart B. Special rules. " Subpart A — G e n e r a l Rule". (2) The t a b l e of chapter s for subtitle D is amended by a d d i n g a t the e n d thereof the following n e w item: "CHAPTER 43. Qualified pension, etc., plans." (3) The table of sections for subchapter B of chapter 68 is amended by striking o u t the item r e l a t i n g to the section captioned "Assessable penalties w i t h respect to information r e q u i r e d to be furnished under section 7654" and inserting i n lieu the r e o f: "Sec. 6688. Assessable penalties with respect to information required to be furnished under section 7654."

26 USC 6688.

26 USC 6861, 26 USC 410 note.

(4) Subchapter B of chapter 68 is amended by striking o u t the heading of the section i m m e d i a t e l y preceding section 6689 and inserting i n lieu thereof: " g g c. gggg. ASSESSABLE PENALTIES WITH RESPECT TO INFORMATION REQUIRED TO BE FURNISHED UNDER SECTION 7654." (6) The table of sections for part II of subchapter A of chapter 70 is amended by striking o u t "and gift taxes" i n the items r e l a t i n g to sections 6861 and 6862 and inserting i n lieu thereof "gift, and certain excise taxes". g E c 1Q17 EFFECTIVE DATES AND TRANSITIONAL RULES. (a) GENERAL RULE. — E x c e p t as otherwise provided i n t h i s section, the amendments made by this part shall apply for plan years b e g i n n i n g after the date of the e n a c t m e n t of t h i s Act. (b) E X I S T I N G P L A N S. — E x c e p t a s otherwise provided i n subsections (c) through (h), i n the case of a p l a n i n existence on January 1, 1974, the amendments made by this part shall apply for plan years b e g i n n i n g after December 31, 1976. (c) E X I S T I N G P L A N S U N D E R COLLECTIVE B A R G A I N I N G A G R E E MENTS.— (1) APPLICATION OF VESTING RULES TO CERTAIN P L A N PROVISIONS.— (A) W A IV E R o r APPLICATION. — I n the case of a p l a n m a i n -

t a i n e d on January 1, 1974, pursuant to one o r more a g r e e m e n t s which the Secretary of Labor finds to be collective b a r g a i n i n g a g r e e m e n t s between employee representative s and one o r more employers, during the special temporary w a i v e r period the p l a n shall not be t r e a t e d as not m e e t i n g the requirements of section 4 1 1 (b)(1) o r (2) of the I n t e r n a l Revenue Code of

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Page:United States Statutes at Large Volume 88 Part 1.djvu/977

 88 STAT. ]

PUBLIC LAW 93-406-SEPT. 2, 1974

1954 solely by reason of a supplementary or special plan provision (within the meaning of subparagraph (D)). (B) SPECIAL TEMPORARY WAIVER PERIOD.—For purposes of this paragraph, the term "special temporary waiver period" means plan years beginning after December 31, 1975, and before the earlier of—• (i) the date on which the last of the collective bargaining 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 (ii) January 1, 1981. For purposes of clause (i), 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 shall not be treated as a termination of such collective bargaining agreement. (C)

^"'^' ^' ^°^-

DETERMINATION BY SECRETARY OP LABOR REQUIRED.—

Subparagraph (A) shall not apply unless the Secretary of Labor determines that the participation and vesting rules in effect on the date of the enactment of this Act are not less favorable to the employees, in the aggregate, than the rules provided under sections 410 and 411 of the Internal Revenue Code of 1954. (D)

933

^"'e, pp. 898,

SUPPLEMENTARY OR SPECIAL PLAN PROVISIONS.—For ^°^*

purposes of this paragraph, the term "supplementary or special plan provision" means any plan provision which— (i) 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 (ii) 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. (2) APPLICATION OP FUNDING RULES.—•

(A) IN GENERAL.—In the case of a plan maintained on January 1, 1974, pursuant to one or more agreements which the Secretary of Labor finds to be collective bargaining agreements between employee representatives and one or more employers, section 412 of the Internal Revenue Code of 1954, and other amendments made by this part to the extent such amendments relate to such section 412, shall not apply during the special temporary waiver period (as defined in paragraph (1)(B)). (B) WAIVER OF UNDERFUNDING.—In the case of a plan maintained on January 1, 1974, pursuant to one or more agreements which the Secretary of Labor finds to be collective bargaining agreements between employee representatives and one or more employers, if by reason of subparagraph (A) the requirements of section 401(a)(7) of the Internal Revenue Code of 1954 apply without regard to the amendment of such section 401(a)(7) by section 1016(a)(2)(C) of this Act, the plan shall not be treated as not meeting such requirements solely by reason of the application of the amendments made by sections 1011 and 1012 of this Act or related amendment« made by this part. (C) LABOR ORGANIZATION CONVENTIONS.—In the case of a plan maintained, by a labor organization, which is exempt from tax under section 501(c)(5) of the Internal Revenue

38-194 O - 76 - 62 Pt. 1

'^"f^' P- 914.

26 USC 40i. ^"'^' P- ^29. ^"'^' PP-

901,

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text:
Page:United States Statutes at Large Volume 88 Part 1.djvu/978

 934 26 USC 501. Ante, p. 914.

26 USC 1 et seq.

Ante, p. 925.

PUBLIC LAW 93-406-SEPT. 2, 1974

Code of 1954, exclusively for the benefit of its employees and their beneficiaries, section 412 of such Code and other amendments made by this part to the extent such amendments relate to such section 412, shall be applied by substituting for the term "December 31, 1976" in subsection (b), the earlier of— (i) the date on which the second convention of such labor organization held after the date of the enactment of this Act ends, or (ii) December 31, 1980, but in no event shall a date earlier than the later of December 31, 1975, or the date determined under subparagraph (A) or (B) be substituted. (d) EXISTING PLANS MAY ELECT N E W PROVISIONS.—In the case of a plan in existence on January 1, 1974, the provisions of the Internal Revenue Code of 1954 relating to participation, vesting, funding, and form of benefit (as in effect from time to time) shall apply in the case of the plan year (which begins after the date of the enactment of this Act but before the applicable effective date determined under subsection (b) or (c)) selected by the plan administrator and to all subsequent plan years, if the plan administrator elects (in such manner and at such time as the Secretary of the Treasury or his delegate shall by regulations prescribe) to have such provisions so apply. Any election made under this subsection, once made, shall be irrevocable. (e)

26 USC 403,405. 26 USC 401. Ante, p. 901.

CERTAIN DEFINITIONS AND SPECIAL HULES.—Section 414 of the

Internal Revenue Code of 1954 (other than subsections (b) and (c) of such section 414), as added by section 1015(a) of this Act, shall take effect on the date of the enactment of this Act. (f)

Ante, p. 898.

[88 STAT.

TRANSITIONAL RULES W I T H RESPECT TO BREAKS I N SERVICE.—

(1) PARTICIPATION.—In the case of a plan to which section 410 ^^ ^j^g Internal Revenue Code of 1954 applies, if 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 such section 410 first becomes effective with respect to such plan) 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 410(a)(5) of such Code, or (B) the date on which his participation would commence under the plan as in effect on January 1, 1974, such plan shall not constitute a plan described in section 403(a) or 405(a) of such Code and a trust forming a part of such plan shall not constitute a qualified trust under section 401(a) of such Code. (2) VESTING.—In the case of a plan to which section 411 of the Internal Revenue Code of 1954 applies, if 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 such section 411 first becomes effective with respect to such plan) provides that the nonforfeitable benefit derived from employer contributions to which any 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 411(a)(6) of such Code, or (B) the plan as in effect on January 1, 1974, such plan shall not constitute a plan described in section 403(a) or 405(a) of such Code and a trust forming a part of such plan shall not constitute a qualified trust under section 401(a) of such Code. 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.

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text:
Page:United States Statutes at Large Volume 88 Part 1.djvu/979

 88 STAT. ] (g)

PUBLIC LAW 93-406-SEPT. 2, 1974

5i35

3-YEAR DELAY FOR CERTAIN PROVISIONS.—Subparagraphs (B)

and (C) of section 404(a)(1) shall apply only in the case of plan years Ante, p. 921. beginning on or after 3 years after the date of the enactment of this Act. (h)(1) Except as provided in paragraph (2), section 413 of the ^"'^' P- ^2'*Internal Revenue Code of 1954 shall apply to plan years beginning after December 31, 1953. (2)(A) For plan years beginning before the applicable effective date of section 410 of such Code, the provisions of paragraphs (1) '^"'^' P- ^^^• and (8) of subsection (b) of such section 413 shall be applied by substituting "401 (a)(3) " for "410". (B) For plan years beginning before the applicable effective date of section 411 of such Cwie, the provisions of subsection (b)(2) of ^"'«' P- ^oisuch section 413 shall be applied by substituting " 4 0 1 (a)(7) " for "411(d)(3)". (C)(i) The provisions of subsection (b)(4) of such section 413 shall not apply to plan years beginning before the applicable effective date of section 411 of such Code. (ii) The provisions of subsection (b)(5) (other than the second sentence thereof) of such section 413 shall not apply to plan years beginning before the applicable effective date of section 412 of such Code. ^"'"' P- ^1^PART 2—CERTAIN OTHER PROVISIONS RELATING TO QUALIFIED RETIREMENT PLANS SEC. 1021. ADDITIONAL PLAN REQUIREMENTS. (a)

JOINT AND SURVIVOR A N N U I T Y REQUIREMENT,—

(1) IN GENERAL.—Effective with rcspect to plan years beginning after December 31, 1975, section 401(a) (relating to requirements for qualification) is amended by inserting after paragraph (10) the following new paragraph: "(11)(A) A trust shall not constitute a qualified trust under this section if the plan of which such trust is a part provides for the payment of benefits in the form of an annuity unless such plan provides for the payment of annuity benefits in a form having the effect of a qualified joint and survivor annuity. " (B) Notwithstanding the provisions of subparagraph (A), in the case of a plan which provides for the payment of benefits before the normal retirement age (as defined in section 411 (a)(8)), 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 beginnimr on the date on which the employee enters into the plan as a participant and ending on the later of— " (i) the date the employee reaches the earliest retirement age under the plan, or " (ii) the first day of the 120th month beginning before the date on which the employee reaches normal retirement age. " (C) A plan described in subparagraph (B) does not meet the requirements of subparagraph (A) unless, under the plan, a participant has a reasonable period during 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 subparagraph (B) ends and ending on the date on which he reaches normal retirement age (as defined in section 411(a)(8)) if he continues his employment during that period. A plan does not meet the requirements of this subparagraph unless, in the case of such an election, the payments under the survivor annuity are not less than the payments which would have been made under the

26 USC 401 note.

ie'usc 401

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Page:United States Statutes at Large Volume 88 Part 1.djvu/980

 936

Definitions.

PUBLIC LAW 93-406-SEPT. 2, 1974

[88 STAT.

joint annuity to which the participant would have been entitled if he made an election described in this subparagraph immediately prior to his retirement and if his retirement had occurred on the day before 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 paragraph solely because the spouse of the participant is not entitled to receive a survivor annuity (whether or not an election described in subparagraph (C) has been made under subparagraph (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 paragraph unless, under the plan, each participant has a reasonable period (as described by the Secretary or his delegate 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 subparagraph) not to take such joint and survivor annuity. " (F) A plan shall not be treated as not satisfying the requirements of this paragraph solely because under the plan there is a provision that any election described in subparagraph (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— "(i) the participant dies from accidental causes, "(ii) a failure to give effect to the election or revocation would deprive the participant's survivor of a survivor annuity, and "(iii) such election or revocation is made before such accident occurred. " ( GT) For purposes of this paragraph— " (i) 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), "(ii) the term 'earliest retirement age' means the earliest date on which, under the plan, the participant could elect to receive retirement benefits, and "(iii) 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 onehalf 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 life annuity for the life of the participant. For purposes of this paragraph, a plan may take into account in any equitable manner (as determmed by the Secretary or his delegate) any increased costs resulting from providing joint and survivor annuity benefits. " (H) This paragraph shall apply only if—

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