Internal Revenue Code:Sec. 418C. Overburden credit against minimum contribution requirement

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Contents


Location in Internal Revenue Code


     TITLE 26 - INTERNAL REVENUE CODE
      Subtitle A - Income Taxes
       CHAPTER 1 - NORMAL TAXES AND SURTAXES
        Subchapter D - Deferred Compensation, Etc.
         PART I - PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.
          Subpart C - Special Rules for Multiemployer Plans
        

Statute

    Sec. 418C. Overburden credit against minimum contribution
        requirement
 
    (a) General rule
      For purposes of determining the contribution under section 418B
    (before the application of section 418B(b)(2) or (d)), the plan
    sponsor of a plan which is overburdened for the plan year shall
    apply an overburden credit against the plan's minimum contribution
    requirement for the plan year (determined without regard to section
    418B(b)(2) or (d) and without regard to this section).
    (b) Definition of overburdened plan
      A plan is overburdened for a plan year if -
        (1) the average number of pay status participants under the
      plan in the base plan year exceeds the average of the number of
      active participants in the base plan year and the 2 plan years
      preceding the base plan year, and
        (2) the rate of employer contributions under the plan equals or
      exceeds the greater of -
          (A) such rate for the preceding plan year, or
          (B) such rate for the plan year preceding the first year in
        which the plan is in reorganization.
    (c) Amount of overburden credit
      The amount of the overburden credit for a plan year is the
    product of -
        (1) one-half of the average guaranteed benefit paid for the
      base plan year, and
        (2) the overburden factor for the plan year.
    The amount of the overburden credit for a plan year shall not
    exceed the amount of the minimum contribution requirement for such
    year (determined without regard to this section).
    (d) Overburden factor
      For purposes of this section, the overburden factor of a plan for
    the plan year is an amount equal to -
        (1) the average number of pay status participants for the base
      plan year, reduced by
        (2) the average of the number of active participants for the
      base plan year and for each of the 2 plan years preceding the
      base plan year.
    (e) Definitions
      For purposes of this section -
      (1) Pay status participant
        The term ''pay status participant'' means, with respect to a
      plan, a participant receiving retirement benefits under the plan.
      (2) Number of active participants
        The number of active participants for a plan year shall be the
      sum of -
          (A) the number of active employees who are participants in
        the plan and on whose behalf contributions are required to be
        made during the plan year;
          (B) the number of active employees who are not participants
        in the plan but who are in an employment unit covered by a
        collective bargaining agreement which requires the employees'
        employer to contribute to the plan unless service in such
        employment unit was never covered under the plan or a
        predecessor thereof, and
          (C) the total number of active employees attributed to
        employers who made payments to the plan for the plan year of
        withdrawal liability pursuant to part 1 of subtitle E of title
        IV of the Employee Retirement Income Security Act of 1974,
        determined by dividing -
            (i) the total amount of such payments, by
            (ii) the amount equal to the total contributions received
          by the plan during the plan year divided by the average
          number of active employees who were participants in the plan
          during the plan year.
      The Secretary shall by regulations provide alternative methods of
      determining active participants where (by reason of irregular
      employment, contributions on a unit basis, or otherwise) this
      paragraph does not yield a representative basis for determining
      the credit.
      (3) Average number
        The term ''average number'' means, with respect to pay status
      participants for a plan year, a number equal to one-half the sum
      of -
          (A) the number with respect to the plan as of the beginning
        of the plan year, and
          (B) the number with respect to the plan as of the end of the
        plan year.
      (4) Average guaranteed benefit
        The average guaranteed benefit paid is 12 times the average
      monthly pension payment guaranteed under section 4022A(c)(1) of
      the Employee Retirement Income Security Act of 1974 determined
      under the provisions of the plan in effect at the beginning of
      the first plan year in which the plan is in reorganization and
      without regard to section 4022A(c)(2).
      (5) First year in reorganization
        The first year in which the plan is in reorganization is the
      first of a period of 1 or more consecutive plan years in which
      the plan has been in reorganization not taking into account any
      plan years the plan was in reorganization prior to any period of
      3 or more consecutive plan years in which the plan was not in
      reorganization.
    (f) No overburden credit in case of certain reductions in
        contributions
      (1) In general
        Notwithstanding any other provision of this section, a plan is
      not eligible for an overburden credit for a plan year if the
      Secretary finds that the plan's current contribution base for any
      plan year was reduced, without a corresponding reduction in the
      plan's unfunded vested benefits attributable to pay status
      participants, as a result of a change in an agreement providing
      for employer contributions under the plan.
      (2) Treatment of certain withdrawals
        For purposes of paragraph (1), a complete or partial withdrawal
      of an employer (within the meaning of part 1 of subtitle E of
      title IV of the Employee Retirement Income Security Act of 1974)
      does not impair a plan's eligibility for an overburden credit,
      unless the Secretary finds that a contribution base reduction
      described in paragraph (1) resulted from a transfer of
      liabilities to another plan in connection with the withdrawal.
    (g) Mergers
      Notwithstanding any other provision of this section, if 2 or more
    multiemployer plans merge, the amount of the overburden credit
    which may be applied under this section with respect to the plan
    resulting from the merger for any of the 3 plan years ending after
    the effective date of the merger shall not exceed the sum of the
    used overburden credit for each of the merging plans for its last
    plan year ending before the effective date of the merger.  For
    purposes of the preceding sentence, the used overburden credit is
    that portion of the credit which does not exceed the excess of the
    minimum contribution requirement determined without regard to any
    overburden credit under this section over the employer
    contributions required under the plan.
 

Sources

    (Added Pub. L. 96-364, title II, Sec. 202(a), Sept. 26, 1980, 94
    Stat. 1278.)
 

References in Text

                             REFERENCES IN TEXT
      The Employee Retirement Income Security Act of 1974, referred to
    in subsecs. (e)(2)(C), (4), and (f)(2), is Pub. L. 93-406, Sept. 2,
    1974, 88 Stat. 829, as amended.  Part 1 of subtitle E of title IV
    of the Employee Retirement Income Security Act of 1974 is
    classified generally to part 1 (Sec. 1381 et seq.) of subtitle E of
    subchapter III of chapter 18 of Title 29, Labor. Section 4022A of
    the Employee Retirement Income Security Act of 1974 is classified
    to section 1322a of Title 29. For complete classification of this
    Act to the Code, see Short Title note set out under section 1001 of
    Title 29 and Tables.
 

References

                   SECTION REFERRED TO IN OTHER SECTIONS
      This section is referred to in sections 418A, 418B of this title.
 

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