§ 1056. Form and payment of benefits
(a)
Commencement date for payment of benefits
Each pension plan shall provide that unless the participant otherwise elects, the payment of benefits under the plan to the participant shall begin not later than the 60th day after the latest of the close of the plan year in which—
(1)
occurs the date on which the participant attains the earlier of age 65 or the normal retirement age specified under the plan,
(2)
occurs the 10th anniversary of the year in which the participant commenced participation in the plan, or
In the case of a plan which provides for the payment of an early retirement benefit, such plan shall provide that a participant who satisfied the service requirements for such early retirement benefit, but separated from the service (with any nonforfeitable right to an accrued benefit) before satisfying the age requirement for such early retirement benefit, is entitled upon satisfaction of such age requirement to receive a benefit not less than the benefit to which he would be entitled at the normal retirement age, actuarially reduced under regulations prescribed by the Secretary of the Treasury.
(b)
Decrease in plan benefits by reason of increases in benefit levels under Social Security Act or Railroad Retirement Act of 1937
If—
a plan may not decrease benefits of such a participant by reason of any increase in the benefit levels payable under title II of the Social Security Act [42 U.S.C. 401 et seq.] or the Railroad Retirement Act of 1937 [45 U.S.C. 231 et seq.] or any increase in the wage base under such title II, if such increase takes place after September 2, 1974, or (if later) the earlier of the date of first entitlement of such benefits or the date of such separation.
(c)
Forfeiture of accrued benefits derived from employer contributions
No pension plan may provide that any part of a participant’s accrued benefit derived from employer contributions (whether or not otherwise nonforfeitable) is forfeitable solely because of withdrawal by such participant of any amount attributable to the benefit derived from contributions made by such participant. The preceding sentence shall not apply
(1)
to the accrued benefit of any participant unless, at the time of such withdrawal, such participant has a nonforfeitable right to at least 50 percent of such accrued benefit, or
(2)
to the extent that an accrued benefit is permitted to be forfeited in accordance with section
1053
(a)(3)(D)(iii) of this title.
(d)
Assignment or alienation of plan benefits
(1)
Each pension plan shall provide that benefits provided under the plan may not be assigned or alienated.
(2)
For the purposes of paragraph (1) of this subsection, there shall not be taken into account any voluntary and revocable assignment of not to exceed 10 percent of any benefit payment, or of any irrevocable assignment or alienation of benefits executed before September 2, 1974. The preceding sentence shall not apply to any assignment or alienation made for the purposes of defraying plan administration costs. For purposes of this paragraph a loan made to a participant or beneficiary shall not be treated as an assignment or alienation if such loan is secured by the participant’s accrued non-forfeitable benefit and is exempt from the tax imposed by section
4975 of title
26 (relating to tax on prohibited transactions) by reason of section
4975
(d)(1) of title
26.
(3)
(A)
Paragraph (1) shall apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a participant pursuant to a domestic relations order, except that paragraph (1) shall not apply if the order is determined to be a qualified domestic relations order. Each pension plan shall provide for the payment of benefits in accordance with the applicable requirements of any qualified domestic relations order.
(B)
For purposes of this paragraph—
(i)
the term “qualified domestic relations order” means a domestic relations order—
(ii)
the term “domestic relations order” means any judgment, decree, or order (including approval of a property settlement agreement) which—
(C)
A domestic relations order meets the requirements of this subparagraph only if such order clearly specifies—
(i)
the name and the last known mailing address (if any) of the participant and the name and mailing address of each alternate payee covered by the order,
(D)
A domestic relations order meets the requirements of this subparagraph only if such order—
(i)
does not require a plan to provide any type or form of benefit, or any option, not otherwise provided under the plan,
(E)
(i)
A domestic relations order shall not be treated as failing to meet the requirements of clause (i) of subparagraph (D) solely because such order requires that payment of benefits be made to an alternate payee—
(I)
in the case of any payment before a participant has separated from service, on or after the date on which the participant attains (or would have attained) the earliest retirement age,
(II)
as if the participant had retired on the date on which such payment is to begin under such order (but taking into account only the present value of benefits actually accrued and not taking into account the present value of any employer subsidy for early retirement), and
(III)
in any form in which such benefits may be paid under the plan to the participant (other than in the form of a joint and survivor annuity with respect to the alternate payee and his or her subsequent spouse).
For purposes of subclause (II), the interest rate assumption used in determining the present value shall be the interest rate specified in the plan or, if no rate is specified, 5 percent.
(F)
To the extent provided in any qualified domestic relations order—
(i)
the former spouse of a participant shall be treated as a surviving spouse of such participant for purposes of section
1055 of this title (and any spouse of the participant shall not be treated as a spouse of the participant for such purposes), and
(G)
(i)
In the case of any domestic relations order received by a plan—
(ii)
Each plan shall establish reasonable procedures to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders. Such procedures—
(H)
(i)
During any period in which the issue of whether a domestic relations order is a qualified domestic relations order is being determined (by the plan administrator, by a court of competent jurisdiction, or otherwise), the plan administrator shall separately account for the amounts (hereinafter in this subparagraph referred to as the “segregated amounts”) which would have been payable to the alternate payee during such period if the order had been determined to be a qualified domestic relations order.
(ii)
If within the 18-month period described in clause (v) the order (or modification thereof) is determined to be a qualified domestic relations order, the plan administrator shall pay the segregated amounts (including any interest thereon) to the person or persons entitled thereto.
(iii)
If within the 18-month period described in clause (v)—
then the plan administrator shall pay the segregated amounts (including any interest thereon) to the person or persons who would have been entitled to such amounts if there had been no order.
(I)
If a plan fiduciary acts in accordance with part 4 of this subtitle in—
(i)
treating a domestic relations order as being (or not being) a qualified domestic relations order, or
then the plan’s obligation to the participant and each alternate payee shall be discharged to the extent of any payment made pursuant to such Act.
(J)
A person who is an alternate payee under a qualified domestic relations order shall be considered for purposes of any provision of this chapter a beneficiary under the plan. Nothing in the preceding sentence shall permit a requirement under section
1301 of this title of the payment of more than 1 premium with respect to a participant for any period.
(K)
The term “alternate payee” means any spouse, former spouse, child, or other dependent of a participant who is recognized by a domestic relations order as having a right to receive all, or a portion of, the benefits payable under a plan with respect to such participant.
(4)
Paragraph (1) shall not apply to any offset of a participant’s benefits provided under an employee pension benefit plan against an amount that the participant is ordered or required to pay to the plan if—
(A)
the order or requirement to pay arises—
(B)
the judgment, order, decree, or settlement agreement expressly provides for the offset of all or part of the amount ordered or required to be paid to the plan against the participant’s benefits provided under the plan, and
(C)
in a case in which the survivor annuity requirements of section
1055 of this title apply with respect to distributions from the plan to the participant, if the participant has a spouse at the time at which the offset is to be made—
(i)
either—
(I)
such spouse has consented in writing to such offset and such consent is witnessed by a notary public or representative of the plan (or it is established to the satisfaction of a plan representative that such consent may not be obtained by reason of circumstances described in section
1055
(c)(2)(B) of this title), or
(ii)
such spouse is ordered or required in such judgment, order, decree, or settlement to pay an amount to the plan in connection with a violation of part 4 of this subtitle, or
(iii)
in such judgment, order, decree, or settlement, such spouse retains the right to receive the survivor annuity under a qualified joint and survivor annuity provided pursuant to section
1055
(a)(1) of this title and under a qualified preretirement survivor annuity provided pursuant to section
1055
(a)(2) of this title, determined in accordance with paragraph (5).
A plan shall not be treated as failing to meet the requirements of section
1055 of this title solely by reason of an offset under this paragraph.
(5)
(B)
For purposes of this paragraph, the term “minimum-required qualified joint and survivor annuity” means the qualified joint and survivor annuity which is the actuarial equivalent of the participant’s accrued benefit (within the meaning of section
1002
(23) of this title) and under which the survivor annuity is 50 percent of the amount of the annuity which is payable during the joint lives of the participant and the spouse.
(e)
Limitation on distributions other than life annuities paid by plan
(1)
In general
Notwithstanding any other provision of this part, the fiduciary of a pension plan that is subject to the additional funding requirements of section
1083
(j)(4) of this title shall not permit a prohibited payment to be made from a plan during a period in which such plan has a liquidity shortfall (as defined in section
1083
(j)(4)(E)(i) of this title).
(2)
Prohibited payment
For purposes of paragraph (1), the term “prohibited payment” means—
(A)
any payment, in excess of the monthly amount paid under a single life annuity (plus any social security supplements described in the last sentence of section
1054
(b)(1)(G) of this title), to a participant or beneficiary whose annuity starting date (as defined in section
1055
(h)(2) of this title), that occurs during the period referred to in paragraph (1),
(g)
Funding-based limits on benefits and benefit accruals under single-employer plans
(1)
Funding-based limitation on shutdown benefits and other unpredictable contingent event benefits under single-employer plans
(A)
In general
If a participant of a defined benefit plan which is a single-employer plan is entitled to an unpredictable contingent event benefit payable with respect to any event occurring during any plan year, the plan shall provide that such benefit may not be provided if the adjusted funding target attainment percentage for such plan year—
(B)
Exemption
Subparagraph (A) shall cease to apply with respect to any plan year, effective as of the first day of the plan year, upon payment by the plan sponsor of a contribution (in addition to any minimum required contribution under section
1083 of this title) equal to—
(i)
in the case of subparagraph (A)(i), the amount of the increase in the funding target of the plan (under section
1083 of this title) for the plan year attributable to the occurrence referred to in subparagraph (A), and
(2)
Limitations on plan amendments increasing liability for benefits
(A)
In general
No amendment to a defined benefit plan which is a single-employer plan which has the effect of increasing liabilities of the plan by reason of increases in benefits, establishment of new benefits, changing the rate of benefit accrual, or changing the rate at which benefits become nonforfeitable may take effect during any plan year if the adjusted funding target attainment percentage for such plan year is—
(B)
Exemption
Subparagraph (A) shall cease to apply with respect to any plan year, effective as of the first day of the plan year (or if later, the effective date of the amendment), upon payment by the plan sponsor of a contribution (in addition to any minimum required contribution under section
1083 of this title) equal to—
(i)
in the case of subparagraph (A)(i), the amount of the increase in the funding target of the plan (under section
1083 of this title) for the plan year attributable to the amendment, and
(C)
Exception for certain benefit increases
Subparagraph (A) shall not apply to any amendment which provides for an increase in benefits under a formula which is not based on a participant’s compensation, but only if the rate of such increase is not in excess of the contemporaneous rate of increase in average wages of participants covered by the amendment.
(3)
Limitations on accelerated benefit distributions
(A)
Funding percentage less than 60 percent
A defined benefit plan which is a single-employer plan shall provide that, in any case in which the plan’s adjusted funding target attainment percentage for a plan year is less than 60 percent, the plan may not pay any prohibited payment after the valuation date for the plan year.
(B)
Bankruptcy
A defined benefit plan which is a single-employer plan shall provide that, during any period in which the plan sponsor is a debtor in a case under title 11 or similar Federal or State law, the plan may not pay any prohibited payment. The preceding sentence shall not apply on or after the date on which the enrolled actuary of the plan certifies that the adjusted funding target attainment percentage of such plan is not less than 100 percent.
(C)
Limited payment if percentage at least 60 percent but less than 80 percent
(i)
In general
A defined benefit plan which is a single-employer plan shall provide that, in any case in which the plan’s adjusted funding target attainment percentage for a plan year is 60 percent or greater but less than 80 percent, the plan may not pay any prohibited payment after the valuation date for the plan year to the extent the amount of the payment exceeds the lesser of—
(ii)
One-time application
(I)
In general
The plan shall also provide that only 1 prohibited payment meeting the requirements of clause (i) may be made with respect to any participant during any period of consecutive plan years to which the limitations under either subparagraph (A) or (B) or this subparagraph applies.
(II)
Treatment of beneficiaries
For purposes of this clause, a participant and any beneficiary on his behalf (including an alternate payee, as defined in subsection (d)(3)(K)) shall be treated as 1 participant. If the accrued benefit of a participant is allocated to such an alternate payee and 1 or more other persons, the amount under clause (i) shall be allocated among such persons in the same manner as the accrued benefit is allocated unless the qualified domestic relations order (as defined in subsection (d)(3)(B)(i)) provides otherwise.
(D)
Exception
This paragraph shall not apply to any plan for any plan year if the terms of such plan (as in effect for the period beginning on September 1, 2005, and ending with such plan year) provide for no benefit accruals with respect to any participant during such period.
(E)
Prohibited payment
For purpose [1] of this paragraph, the term “prohibited payment” means—
(i)
any payment, in excess of the monthly amount paid under a single life annuity (plus any social security supplements described in the last sentence of section
1054
(b)(1)(G) of this title), to a participant or beneficiary whose annuity starting date (as defined in section
1055
(h)(2) of this title) occurs during any period a limitation under subparagraph (A) or (B) is in effect,
(4)
Limitation on benefit accruals for plans with severe funding shortfalls
(A)
In general
A defined benefit plan which is a single-employer plan shall provide that, in any case in which the plan’s adjusted funding target attainment percentage for a plan year is less than 60 percent, benefit accruals under the plan shall cease as of the valuation date for the plan year.
(B)
Exemption
Subparagraph (A) shall cease to apply with respect to any plan year, effective as of the first day of the plan year, upon payment by the plan sponsor of a contribution (in addition to any minimum required contribution under section
1083 of this title) equal to the amount sufficient to result in an adjusted funding target attainment percentage of 60 percent.
(5)
Rules relating to contributions required to avoid benefit limitations
(A)
Security may be provided
(i)
In general
For purposes of this subsection, the adjusted funding target attainment percentage shall be determined by treating as an asset of the plan any security provided by a plan sponsor in a form meeting the requirements of clause (ii).
(ii)
Form of security
The security required under clause (i) shall consist of—
(I)
a bond issued by a corporate surety company that is an acceptable surety for purposes of section
1112 of this title,
(iii)
Enforcement
Any security provided under clause (i) may be perfected and enforced at any time after the earlier of—
(iv)
Release of security
The security shall be released (and any amounts thereunder shall be refunded together with any interest accrued thereon) at such time as the Secretary of the Treasury may prescribe in regulations, including regulations for partial releases of the security by reason of increases in the adjusted funding target attainment percentage.
(C)
Deemed reduction of funding balances
(i)
In general
Subject to clause (iii), in any case in which a benefit limitation under paragraph (1), (2), (3), or (4) would (but for this subparagraph and determined without regard to paragraph (1)(B), (2)(B), or (4)(B)) apply to such plan for the plan year, the plan sponsor of such plan shall be treated for purposes of this chapter as having made an election under section
1083
(f) of this title to reduce the prefunding balance or funding standard carryover balance by such amount as is necessary for such benefit limitation to not apply to the plan for such plan year.
(ii)
Exception for insufficient funding balances
Clause (i) shall not apply with respect to a benefit limitation for any plan year if the application of clause (i) would not result in the benefit limitation not applying for such plan year.
(iii)
Restrictions of certain rules to collectively bargained plans
With respect to any benefit limitation under paragraph (1), (2), or (4), clause (i) shall only apply in the case of a plan maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers.
(6)
New plans
Paragraphs (1), (2), and (4) shall not apply to a plan for the first 5 plan years of the plan. For purposes of this paragraph, the reference in this paragraph to a plan shall include a reference to any predecessor plan.
(7)
Presumed underfunding for purposes of benefit limitations
(A)
Presumption of continued underfunding
In any case in which a benefit limitation under paragraph (1), (2), (3), or (4) has been applied to a plan with respect to the plan year preceding the current plan year, the adjusted funding target attainment percentage of the plan for the current plan year shall be presumed to be equal to the adjusted funding target attainment percentage of the plan for the preceding plan year until the enrolled actuary of the plan certifies the actual adjusted funding target attainment percentage of the plan for the current plan year.
(B)
Presumption of underfunding after 10th month
In any case in which no certification of the adjusted funding target attainment percentage for the current plan year is made with respect to the plan before the first day of the 10th month of such year, for purposes of paragraphs (1), (2), (3), and (4), such first day shall be deemed, for purposes of such paragraph, to be the valuation date of the plan for the current plan year and the plan’s adjusted funding target attainment percentage shall be conclusively presumed to be less than 60 percent as of such first day.
(C)
Presumption of underfunding after 4th month for nearly underfunded plans
In any case in which—
(i)
a benefit limitation under paragraph (1), (2), (3), or (4) did not apply to a plan with respect to the plan year preceding the current plan year, but the adjusted funding target attainment percentage of the plan for such preceding plan year was not more than 10 percentage points greater than the percentage which would have caused such paragraph to apply to the plan with respect to such preceding plan year, and
(ii)
as of the first day of the 4th month of the current plan year, the enrolled actuary of the plan has not certified the actual adjusted funding target attainment percentage of the plan for the current plan year,
until the enrolled actuary so certifies, such first day shall be deemed, for purposes of such paragraph, to be the valuation date of the plan for the current plan year and the adjusted funding target attainment percentage of the plan as of such first day shall, for purposes of such paragraph, be presumed to be equal to 10 percentage points less than the adjusted funding target attainment percentage of the plan for such preceding plan year.
(8)
Treatment of plan as of close of prohibited or cessation period
For purposes of applying this part—
(9)
Terms relating to funding target attainment percentage
For purposes of this subsection—
(B)
Adjusted funding target attainment percentage
The term “adjusted funding target attainment percentage” means the funding target attainment percentage which is determined under subparagraph (A) by increasing each of the amounts under subparagraphs (A) and (B) of section
1083
(d)(2) of this title by the aggregate amount of purchases of annuities for employees other than highly compensated employees (as defined in section
414
(q) of title
26) which were made by the plan during the preceding 2 plan years.
(C)
Application to plans which are fully funded without regard to reductions for funding balances
(i)
In general
In the case of a plan for any plan year, if the funding target attainment percentage is 100 percent or more (determined without regard to the reduction in the value of assets under section
1083
(f)(4) of this title), the funding target attainment percentage for purposes of subparagraphs (A) and (B) shall be determined without regard to such reduction.
(ii)
Transition rule
Clause (i) shall be applied to plan years beginning after 2007 and before 2011 by substituting for “100 percent” the applicable percentage determined in accordance with the following table:
In the case of a plan year
The applicable
beginning in calendar year:
percentage is
2008
92
2009
94
2010
96.
(iii)
Limitation
Clause (ii) shall not apply with respect to any plan year beginning after 2008 unless the funding target attainment percentage (determined without regard to the reduction in the value of assets under section
1083
(f)(4) of this title) of the plan for each preceding plan year beginning after 2007 was not less than the applicable percentage with respect to such preceding plan year determined under clause (ii).
(10)
Secretarial authority for plans with alternate valuation date
In the case of a plan which has designated a valuation date other than the first day of the plan year, the Secretary of the Treasury may prescribe rules for the application of this subsection which are necessary to reflect the alternate valuation date.
[1] So in original. Probably should be “purposes”.