29 U.S.C. § 1344 : US Code - Section 1344: Allocation of assets

Search 29 U.S.C. § 1344 : US Code - Section 1344: Allocation of assets

(a) Order of priority of participants and beneficiaries
In the case of the termination of a single-employer plan, the
plan administrator shall allocate the assets of the plan (available
to provide benefits) among the participants and beneficiaries of
the plan in the following order:
(1) First, to that portion of each individual's accrued benefit
which is derived from the participant's contributions to the plan
which were not mandatory contributions.
(2) Second, to that portion of each individual's accrued
benefit which is derived from the participant's mandatory
contributions.
(3) Third, in the case of benefits payable as an annuity -
(A) in the case of the benefit of a participant or
beneficiary which was in pay status as of the beginning of the
3-year period ending on the termination date of the plan, to
each such benefit, based on the provisions of the plan (as in
effect during the 5-year period ending on such date) under
which such benefit would be the least,
(B) in the case of a participant's or beneficiary's benefit
(other than a benefit described in subparagraph (A)) which
would have been in pay status as of the beginning of such 3-
year period if the participant had retired prior to the
beginning of the 3-year period and if his benefits had
commenced (in the normal form of annuity under the plan) as of
the beginning of such period, to each such benefit based on the
provisions of the plan (as in effect during the 5-year period
ending on such date) under which such benefit would be the
least.
For purposes of subparagraph (A), the lowest benefit in pay
status during a 3-year period shall be considered the benefit in
pay status for such period.
(4) Fourth -
(A) to all other benefits (if any) of individuals under the
plan guaranteed under this subchapter (determined without
regard to section 1322b(a) of this title), and
(B) to the additional benefits (if any) which would be
determined under subparagraph (A) if section 1322(b)(5) of this
title did not apply.
For purposes of this paragraph, section 1321 of this title shall
be applied without regard to subsection (c) thereof.
(5) Fifth, to all other nonforfeitable benefits under the plan.
(6) Sixth, to all other benefits under the plan.
(b) Adjustment of allocations; reallocations; mandatory
contributions; establishment of subclasses and categories
For purposes of subsection (a) of this section -
(1) The amount allocated under any paragraph of subsection (a)
of this section with respect to any benefit shall be properly
adjusted for any allocation of assets with respect to that
benefit under a prior paragraph of subsection (a) of this
section.
(2) If the assets available for allocation under any paragraph
of subsection (a) of this section (other than paragraphs (5) and
(6)) are insufficient to satisfy in full the benefits of all
individuals which are described in that paragraph, the assets
shall be allocated pro rata among such individuals on the basis
of the present value (as of the termination date) of their
respective benefits described in that paragraph.
(3) This paragraph applies if the assets available for
allocation under paragraph (5) of subsection (a) of this section
are not sufficient to satisfy in full the benefits of individuals
described in that paragraph.
(A) If this paragraph applies, except as provided in
subparagraph (B), the assets shall be allocated to the benefits
of individuals described in such paragraph (5) on the basis of
the benefits of individuals which would have been described in
such paragraph (5) under the plan as in effect at the beginning
of the 5-year period ending on the date of plan termination.
(B) If the assets available for allocation under subparagraph
(A) are sufficient to satisfy in full the benefits described in
such subparagraph (without regard to this subparagraph), then
for purposes of subparagraph (A), benefits of individuals
described in such subparagraph shall be determined on the basis
of the plan as amended by the most recent plan amendment
effective during such 5-year period under which the assets
available for allocation are sufficient to satisfy in full the
benefits of individuals described in subparagraph (A) and any
assets remaining to be allocated under such subparagraph shall
be allocated under subparagraph (A) on the basis of the plan as
amended by the next succeeding plan amendment effective during
such period.
(4) If the Secretary of the Treasury determines that the
allocation made pursuant to this section (without regard to this
paragraph) results in discrimination prohibited by section
401(a)(4) of title 26 then, if required to prevent the
disqualification of the plan (or any trust under the plan) under
section 401(a) or 403(a) of title 26, the assets allocated under
subsections (a)(4)(B), (a)(5), and (a)(6) of this section shall
be reallocated to the extent necessary to avoid such
discrimination.
(5) The term "mandatory contributions" means amounts
contributed to the plan by a participant which are required as a
condition of employment, as a condition of participation in such
plan, or as a condition of obtaining benefits under the plan
attributable to employer contributions. For this purpose, the
total amount of mandatory contributions of a participant is the
amount of such contributions reduced (but not below zero) by the
sum of the amounts paid or distributed to him under the plan
before its termination.
(6) A plan may establish subclasses and categories within the
classes described in paragraphs (1) through (6) of subsection (a)
of this section in accordance with regulations prescribed by the
corporation.
(c) Increase or decrease in value of assets
Any increase or decrease in the value of the assets of a single-
employer plan occurring during the period beginning on the later
of (1) the date a trustee is appointed under section 1342(b) of
this title or (2) the date on which the plan is terminated is to be
allocated between the plan and the corporation in the manner
determined by the court (in the case of a court-appointed trustee)
or as agreed upon by the corporation and the plan administrator in
any other case. Any increase or decrease in the value of the assets
of a single-employer plan occurring after the date on which the
plan is terminated shall be credited to, or suffered by, the
corporation.
(d) Distribution of residual assets; restrictions on reversions
pursuant to recently amended plans; assets attributable to
employee contributions; calculation of remaining assets
(1) Subject to paragraph (3), any residual assets of a single-
employer plan may be distributed to the employer if -
(A) all liabilities of the plan to participants and their
beneficiaries have been satisfied,
(B) the distribution does not contravene any provision of law,
and
(C) the plan provides for such a distribution in these
circumstances.
(2)(A) In determining the extent to which a plan provides for the
distribution of plan assets to the employer for purposes of
paragraph (1)(C), any such provision, and any amendment increasing
the amount which may be distributed to the employer, shall not be
treated as effective before the end of the fifth calendar year
following the date of the adoption of such provision or amendment.
(B) A distribution to the employer from a plan shall not be
treated as failing to satisfy the requirements of this paragraph if
the plan has been in effect for fewer than 5 years and the plan has
provided for such a distribution since the effective date of the
plan.
(C) Except as otherwise provided in regulations of the Secretary
of the Treasury, in any case in which a transaction described in
section 1058 of this title occurs, subparagraph (A) shall continue
to apply separately with respect to the amount of any assets
transferred in such transaction.
(D) For purposes of this subsection, the term "employer" includes
any member of the controlled group of which the employer is a
member. For purposes of the preceding sentence, the term
"controlled group" means any group treated as a single employer
under subsection (b), (c), (m) or (o) of section 414 of title 26.
(3)(A) Before any distribution from a plan pursuant to paragraph
(1), if any assets of the plan attributable to employee
contributions remain after satisfaction of all liabilities
described in subsection (a) of this section, such remaining assets
shall be equitably distributed to the participants who made such
contributions or their beneficiaries (including alternate payees,
within the meaning of section 1056(d)(3)(K) of this title).
(B) For purposes of subparagraph (A), the portion of the
remaining assets which are attributable to employee contributions
shall be an amount equal to the product derived by multiplying -
(i) the market value of the total remaining assets, by
(ii) a fraction -
(I) the numerator of which is the present value of all
portions of the accrued benefits with respect to participants
which are derived from participants' mandatory contributions
(referred to in subsection (a)(2) of this section), and
(II) the denominator of which is the present value of all
benefits with respect to which assets are allocated under
paragraphs (2) through (6) of subsection (a) of this section.
(C) For purposes of this paragraph, each person who is, as of the
termination date -
(i) a participant under the plan, or
(ii) an individual who has received, during the 3-year period
ending with the termination date, a distribution from the plan of
such individual's entire nonforfeitable benefit in the form of a
single sum distribution in accordance with section 1053(e) of
this title or in the form of irrevocable commitments purchased by
the plan from an insurer to provide such nonforfeitable benefit,
shall be treated as a participant with respect to the termination,
if all or part of the nonforfeitable benefit with respect to such
person is or was attributable to participants' mandatory
contributions (referred to in subsection (a)(2) of this section).
(4) Nothing in this subsection shall be construed to limit the
requirements of section 4980(d) of title 26 (as in effect
immediately after the enactment of the Omnibus Budget
Reconciliation Act of 1990) or section 1104(d) of this title with
respect to any distribution of residual assets of a single-employer
plan to the employer.