§ 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)(B) 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.
(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 (4), (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)
If assets available for allocation under paragraph (4) of subsection (a) are insufficient to satisfy in full the benefits of all individuals who are described in that paragraph, the assets shall be allocated first to benefits described in subparagraph (A) of that paragraph. Any remaining assets shall then be allocated to benefits described in subparagraph (B) of that paragraph. If assets allocated to such subparagraph (B) are insufficient to satisfy in full the benefits described in that subparagraph, the assets shall be allocated pro rata among individuals on the basis of the present value (as of the termination date) of their respective benefits described in that subparagraph.
(4)
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.
(5)
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.
(6)
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.
(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
(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—
(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—
(C)
For purposes of this paragraph, each person who is, as of the termination date—
(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.
(e)
Bankruptcy filing substituted for termination date
If a contributing sponsor of a plan has filed or has had filed against such person a petition seeking liquidation or reorganization in a case under title 11 or under any similar Federal law or law of a State or political subdivision, and the case has not been dismissed as of the termination date of the plan, then subsection (a)(3) shall be applied by treating the date such petition was filed as the termination date of the plan.
(f)
Valuation of section
1362
(c) liability for determining amounts payable by corporation to participants and beneficiaries
(1)
In general
In the case of a terminated plan, the value of the recovery of liability under section
1362
(c) of this title allocable as a plan asset under this section for purposes of determining the amount of benefits payable by the corporation shall be determined by multiplying—
(2)
Section
1362
(c) recovery ratio
For purposes of this subsection—
(A)
In general
Except as provided in subparagraph (C), the term “section
1362
(c) recovery ratio” means the ratio which—
(B)
Prior terminations
A plan termination described in this subparagraph is a termination with respect to which—
(i)
the value of recoveries under section
1362
(c) of this title have been determined by the corporation, and
(ii)
notices of intent to terminate were provided (or in the case of a termination by the corporation, a notice of determination under section
1342 of this title was issued) during the 5-Federal fiscal year period ending with the third fiscal year preceding the fiscal year in which occurs the date of the notice of intent to terminate (or the notice of determination under section
1342 of this title) with respect to the plan termination for which the recovery ratio is being determined.