29 C.F.R. PART 4231—MERGERS AND TRANSFERS BETWEEN MULTIEMPLOYER PLANS
Title 29 - Labor
Authority: 29 U.S.C. 1302(b)(3), 1411.
Source: 63 FR 24421, May 4, 1998, unless otherwise noted.
(a) Purpose. The purpose of this part is to prescribe notice requirements under section 4231 of ERISA for mergers and transfers of assets or liabilities among multiemployer pension plans. This part also interprets the other requirements of section 4231 and prescribes special rules for de minimis mergers and transfers. The collections of information in this part have been approved by the Office of Management and Budget under OMB control number 1212–0022. (b) Scope. This part applies to mergers and transfers among multiemployer plans where all of the plans immediately before and immediately after the transaction are multiemployer plans covered by title IV of ERISA. The following terms are defined in §4001.2 of this chapter: Code, EIN, ERISA, fair market value, IRS, multiemployer plan, PBGC, plan, plan year, and PN. In addition, for purposes of this part: Actuarial valuation means a valuation of assets and liabilities performed by an enrolled actuary using the actuarial assumptions used for purposes of determining the charges and credits to the funding standard account under section 302 of ERISA and section 412 of the Code. Certified change of collective bargaining representative means a change of collective bargaining representative certified under the Labor-Management Relations Act of 1947, as amended, or the Railway Labor Act, as amended. Fair market value of assets has the same meaning as the term has for minimum funding purposes under section 302 of ERISA and section 412 of the Code. Merger means the combining of two or more plans into a single plan. For example, a consolidation of two plans into a new plan is a merger. Significantly affected plan means a plan that— (1) Transfers assets that equal or exceed 15 percent of its assets before the transfer, (2) Receives a transfer of unfunded accrued benefits that equal or exceed 15 percent of its assets before the transfer, (3) Is created by a spinoff from another plan, or (4) Engages in a merger or transfer (other than a de minimis merger or transfer) either— (i) After such plan has terminated by mass withdrawal under section 4041A(a)(2) of ERISA, or (ii) With another plan that has so terminated. Transfer and transfer of assets or liabilities mean a diminution of assets or liabilities with respect to one plan and the acquisition of these assets or the assumption of these liabilities by another plan or plans (including a plan that did not exist prior to the transfer). However, the shifting of assets or liabilities pursuant to a written reciprocity agreement between two multiemployer plans in which one plan assumes liabilities of another plan is not a transfer of assets or liabilities. In addition, the shifting of assets between several funding media used for a single plan (such as between trusts, between annuity contracts, or between trusts and annuity contracts) is not a transfer of assets or liabilities. Unfunded accrued benefits means the excess of the present value of a plan's accrued benefits over the fair market value of its assets, determined on the basis of the actuarial valuation required under §4231.5(b). (a) General requirements. A plan sponsor may not cause a multiemployer plan to merge with one or more multiemployer plans or transfer assets or liabilities to or from another multiemployer plan unless the merger or transfer satisfies all of the following requirements: (1) No participant's or beneficiary's accrued benefit is lower immediately after the effective date of the merger or transfer than the benefit immediately before that date. (2) Actuarial valuations of the plans that existed before the merger or transfer have been performed in accordance with §4231.5. (3) For each plan that exists after the transaction, an enrolled actuary— (i) Determines that the plan meets the applicable plan solvency requirement set forth in §4231.6; or (ii) Otherwise demonstrates that benefits under the plan are not reasonably expected to be subject to suspension under section 4245 of ERISA. (4) The plan sponsor notifies the PBGC of the merger or transfer in accordance with §4231.8. (b) Compliance determination. If a plan sponsor requests a determination that a merger or transfer that may otherwise be prohibited by section 406(a) or (b)(2) of ERISA satisfies the requirements of section 4231 of ERISA, the plan sponsor must submit the information described in §4231.9 in addition to the information required by §4231.8. PBGC may request additional information if necessary to determine whether a merger or transfer complies with the requirements of section 4231 and this part. Plan sponsors are not required to request a compliance determination. Under section 4231(c) of ERISA, if the PBGC determines that the merger or transfer complies with section 4231 of ERISA and this part, the merger or transfer will not constitute a violation of the prohibited transaction provisions of section 406(a) and (b)(2) of ERISA. (c) Certified change in bargaining representative. Transfers of assets and liabilities pursuant to a certified change in bargaining representative are governed by section 4235 of ERISA. Plan sponsors involved in such transfers are not required to comply with this part. However, under section 4235(f)(1) of ERISA, the plan sponsors of the plans involved in the transfer may agree to a transfer that complies with sections 4231 and 4234 of ERISA. Plan sponsors that elect to comply with sections 4231 and 4234 must comply with the rules in this part. Section 4231(b)(2) of ERISA and §4231.3(a)(1) require that no participant's or beneficiary's accrued benefit may be lower immediately after the effective date of the merger or transfer than the benefit immediately before the merger or transfer. A plan that assumes an obligation to pay benefits for a group of participants satisfies this requirement only if the plan contains a provision preserving all accrued benefits. The determination of what is an accrued benefit must be made in accordance with section 411 of the Code and the regulations thereunder. (a) In general. For a plan that is not a significantly affected plan, or that is a significantly affected plan only because the merger or transfer involves a plan that has terminated by mass withdrawal under section 4041A(a)(2) of ERISA, the actuarial valuation requirement under section 4231(b)(4) of ERISA and §4231.3(a)(2) is satisfied if an actuarial valuation has been performed for the plan based on the plan's assets and liabilities as of a date not more than three years before the date on which the notice of the merger or transfer is filed. (b) Significantly affected plans. For a significantly affected plan, other than a plan that is a significantly affected plan only because the merger or transfer involves a plan that has terminated by mass withdrawal under section 4041A(a)(2) of ERISA, the actuarial valuation requirement under section 4231(b)(4) of ERISA and §4231.3(a)(2) is satisfied only if an actuarial valuation has been performed for the plan based on the plan's assets and liabilities as of a date not earlier than the first day of the last plan year ending before the proposed effective date of the transaction. The valuation must separately identify assets, contributions, and liabilities being transferred and must be based on the actuarial assumptions and methods that are expected to be used for the plan for the first plan year beginning after the transfer. (a) In general. For a plan that is not a significantly affected plan, the plan solvency requirement of section 4231(b)(3) of ERISA and §4231.3(a)(3)(i) is satisfied if— (1) The expected fair market value of plan assets immediately after the merger or transfer equals or exceeds five times the benefit payments for the last plan year ending before the proposed effective date of the merger or transfer; or (2) In each of the first five plan years beginning on or after the proposed effective date of the merger or transfer, expected plan assets plus expected contributions and investment earnings equal or exceed expected expenses and benefit payments for the plan year. (b) Significantly affected plans. The plan solvency requirement of section 4231(b)(3) of ERISA and §4231.3(a)(3)(i) is satisfied for a significantly affected plan if all of the following requirements are met: (1) Expected contributions equal or exceed the estimated amount necessary to satisfy the minimum funding requirement of section 412(a) of the Code (including reorganization funding, if applicable) for the five plan years beginning on or after the proposed effective date of the transaction. (2) The expected fair market value of plan assets immediately after the transaction equal or exceed the total amount of expected benefit payments for the first five plan years beginning on or after the proposed effective date of the transaction. (3) Expected contributions for the first plan year beginning on or after the proposed effective date of the transaction equal or exceed expected benefit payments for that plan year. (4) Expected contributions for the amortization period equal or exceed unfunded accrued benefits plus expected normal costs. The actuary may select as the amortization period either— (i) The first 25 plan years beginning on or after the proposed effective date of the transaction, or (ii) The amortization period for the resulting base when the combined charge base and the combined credit base are offset under section 412(b)(4) of the Code. (c) Rules for determinations. In determining whether a transaction satisfies the plan solvency requirements set forth in this section, the following rules apply: (1) Expected contributions after a merger or transfer must be determined by assuming that contributions for each plan year will equal contributions for the last full plan year ending before the date on which the notice of merger or transfer is filed with the PBGC. Contributions must be adjusted, however, to reflect— (i) The merger or transfer, (ii) Any change in the rate of employer contributions that has been negotiated (whether or not in effect), and (iii) Any trend of changing contribution base units over the preceding five plan years or other period of time that can be demonstrated to be more appropriate. (2) Expected normal costs must be determined under the funding method and assumptions expected to be used by the plan actuary for purposes of determining the minimum funding requirement under section 412 of the Code (which requires that such assumptions be reasonable in the aggregate). If the plan uses an aggregate funding method, normal costs must be determined under the entry age normal method. (3) Expected benefit payments must be determined by assuming that current benefits remain in effect and that all scheduled increases in benefits occur. (4) The expected fair market value of plan assets immediately after the merger or transfer must be based on the most recent data available immediately before the date on which the notice is filed. (5) Expected investment earnings must be determined using the same interest assumption to be used for determining the minimum funding requirement under section 412 of the Code. (6) Expected expenses must be determined using expenses in the last plan year ending before the notice is filed, adjusted to reflect any anticipated changes. (7) Expected plan assets for a plan year must be determined by adjusting the most current data on fair market value of plan assets to reflect expected contributions, investment earnings, benefit payments and expenses for each plan year between the date of the most current data and the beginning of the plan year for which expected assets are being determined. (a) Special plan solvency rule. The determination of whether a de minimis merger or transfer satisfies the plan solvency requirement in §4231.6(a) may be made without regard to any other de minimis mergers or transfers that have occurred since the last actuarial valuation. (b) De minimis merger defined. A merger is de minimis if the present value of accrued benefits (whether or not vested) of one plan is less than 3 percent of the fair market value of the other plan's assets. (c) De minimis transfer defined. A transfer of assets or liabilities is de minimis if— (1) The fair market value of the assets transferred, if any, is less than 3 percent of the fair market value of all the assets of the transferor plan; (2) The present value of the accrued benefits transferred (whether or not vested) is less than 3 percent of the fair market value of all the assets of the transferee plan; and (3) The transferee plan is not a plan that has terminated under section 4041A(a)(2) of ERISA. (d) Value of assets and benefits. For purposes of paragraphs (b) and (c) of this section, the value of plan assets and accrued benefits may be determined as of any date prior to the proposed effective date of the transaction, but not earlier than the date of the most recent actuarial valuation. (e) Aggregation required. In determining whether a merger or transfer is de minimis, the assets and accrued benefits transferred in previous de minimis mergers and transfers within the same plan year must be aggregated as described in paragraphs (e)(1) and (e)(2) of this section. For the purposes of those paragraphs, the value of plan assets may be determined as of the date during the plan year on which the total value of the plan's assets is the highest. (1) A merger is not de minimis if the total present value of accrued benefits merged into a plan, when aggregated with all prior de minimis mergers of and transfers to that plan effective within the same plan year, equals or exceeds 3 percent of the value of the plan's assets. (2) A transfer is not de minimis if, when aggregated with all previous de minimis mergers and transfers effective within the same plan year— (i) The value of all assets transferred from a plan equals or exceeds 3 percent of the value of the plan's assets; or (ii) The present value of all accrued benefits transferred to a plan equals or exceeds 3 percent of the plan's assets. (a) Filing of request—(1) When to file. Except as provided in paragraph (f) of this section, a notice of a proposed merger or transfer must be filed not less than 120 days before the effective date of the transaction. For purposes of this part, the effective date of a merger or transfer is the earlier of— (i) The date on which one plan assumes liability for benefits accrued under another plan involved in the transaction; or (ii) The date on which one plan transfers assets to another plan involved in the transaction. (2) Method of filing. The PBGC applies the rules in subpart A of part 4000 of this chapter to determine permissible methods of filing with the PBGC under this part. (3) Computation of time. The PBGC applies the rules in subpart D of part 4000 of this chapter to compute any time period for filing under this part. (b) Who must file. The plan sponsors of all plans involved in a merger or transfer, or the duly authorized representative(s) acting on behalf of the plan sponsors, must jointly file the notice required by this section. (c) Where to file. See §4000.4 of this chapter for information on where to file. (d) Date of filing. The PBGC applies the rules in subpart C of part 4000 of this chapter to determine the date that a submission under this part was filed with the PBGC. For purposes of paragraph (a) of this section, the notice is not considered filed until all of the information required by paragraph (e) of this section has been submitted. (e) Information required. Each notice must contain the following information: (1) For each plan involved in the merger or transfer— (i) The name of the plan; (ii) The name, address and telephone number of the plan sponsor and of the plan sponsor's duly authorized representative, if any; and (iii) The plan sponsor's EIN and the plan's PN and, if different, the EIN or PN last filed with the PBGC. If no EIN or PN has been assigned, the notice must so indicate. (2) Whether the transaction being reported is a merger or transfer, whether it involves any plan that has terminated under section 4041A(a)(2) of ERISA, whether any significantly affected plan is involved in the transaction (and, if so, identifying each such plan), and whether it is a de minimis transaction as defined in §4231.7 (and, if so, including an enrolled actuary's certification to that effect). (3) The proposed effective date of the transaction. (4) A copy of each plan provision stating that no participant's or beneficiary's accrued benefit will be lower immediately after the effective date of the merger or transfer than the benefit immediately before that date. (5) For each plan that exists after the transaction, one of the following statements, certified by an enrolled actuary: (i) A statement that the plan satisfies the applicable plan solvency test set forth in §4231.6, indicating which is the applicable test. (ii) A statement of the basis on which the actuary has determined that benefits under the plan are not reasonably expected to be subject to suspension under section 4245 of ERISA, including the supporting data or calculations, assumptions and methods. (6) For each plan that exists before a transaction (unless the transaction is de minimis and does not involve any plan that has terminated under section 4041A(a)(2) of ERISA), a copy of the most recent actuarial valuation report that satisfies the requirements of §4231.5. (7) For each significantly affected plan that exists after the transaction, the following information used in making the plan solvency determination under §4231.6(b): (i) The present value of the accrued benefits and fair market value of plan assets under the valuation required by §4231.5(b), allocable to the plan after the transaction. (ii) The fair market value of assets in the plan after the transaction (determined in accordance with §4231.6(c)(4)). (iii) The expected benefit payments for the plan in the first plan year beginning on or after the proposed effective date of the transaction (determined in accordance with §4231.6(c)(3)). (iv) The contribution rates in effect for the plan for the first plan year beginning on or after the proposed effective date of the transaction. (v) The expected contributions for the plan in the first plan year beginning on or after the proposed effective date of the transaction (determined in accordance with §4231.6(c)(1)). (f) Waiver of notice. The PBGC may waive the notice requirements of this section and section 4231(b)(1) of ERISA if— (1) A plan sponsor demonstrates to the satisfaction of the PBGC that failure to complete the merger or transfer in less than 120 days after filing the notice will cause harm to participants or beneficiaries of the plans involved in the transaction; (2) The PBGC determines that the transaction complies with the requirements of section 4231 of ERISA; or (3) The PBGC completes its review of the transaction. [63 FR 24421, May 4, 1998, as amended at 68 FR 61356, Oct. 28, 2003] (a) General. The plan sponsor(s) of one or more plans involved in a merger or transfer, or the duly authorized representative(s) acting on behalf of the plan sponsor(s), may file a request for a determination that the transaction complies with the requirements of section 4231 of ERISA. The request must contain the information described in paragraph (b) or (c) of this section, as applicable. (1) The place of filing. The request must be delivered to the address set forth in §4231.8(c). (2) Single request permitted for all de minimis transactions. Because the plan solvency test for de minimis mergers and transfers is based on the most recent valuation (without adjustment for intervening de minimis transactions), a plan sponsor may submit a single request for a compliance determination covering all de minimis mergers or transfers that occur between one plan valuation and the next. However, the plan sponsor must still notify PBGC of each de minimis merger or transfer separately, in accordance with §4231.8. The single request for a compliance determination may be filed concurrently with any one of the notices of a de minimis merger or transfer. (b) Contents of request—(1) General. A request for a compliance determination concerning a merger or transfer that is not de minimis must contain— (i) A copy of the merger or transfer agreement; (ii) A summary of the required calculations, including a complete description of assumptions and methods, on which the enrolled actuary based each certification that a plan involved in the merger or transfer satisfied a plan solvency test described in §4231.6; and (iii) For each significantly affected plan, other than a plan that is a significantly affected plan only because the merger or transfer involves a plan that has terminated by mass withdrawal under section 4041A(a)(2) of ERISA, copies of all actuarial valuations performed within the 5 years preceding the date of filing the notice required under §4231.8. (2) De minimis merger or transfer. A request for a compliance determination concerning a de minimis merger or transfer must contain one of the following statements for each plan that exists after the transaction, certified by an enrolled actuary: (i) A statement that the plan satisfies one of the plan solvency tests set forth in §4231.6(a), indicating which test is satisfied. (ii) A statement of the basis on which the actuary has determined that benefits under the plan are not reasonably expected to be subject to suspension under section 4245 of ERISA, including supporting data or calculations, assumptions and methods. (a) Most recent valuation. All calculations required by this part must be based on the most recent actuarial valuation as of the date of filing the notice, updated to show any material changes. (b) Assumptions. All calculations required by this part must be based on methods and assumptions that are reasonable in the aggregate, based on generally accepted actuarial principles. (c) Updated calculations. If the actual effective date of the merger or transfer is more than one year after the date the notice is filed with the PBGC, PBGC may require the plans involved to provide updated calculations and representations based on the actual effective date of the transaction.
Title 29: Labor
PART 4231—MERGERS AND TRANSFERS BETWEEN MULTIEMPLOYER PLANS
Section Contents
§ 4231.1 Purpose and scope.
§ 4231.2 Definitions.
§ 4231.3 Requirements for mergers and transfers.
§ 4231.4 Preservation of accrued benefits.
§ 4231.5 Valuation requirement.
§ 4231.6 Plan solvency tests.
§ 4231.7
§ 4231.8 Notice of merger or transfer.
§ 4231.9 Request for compliance determination.
§ 4231.10 Actuarial calculations and assumptions.
§ 4231.1 Purpose and scope.
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§ 4231.2 Definitions.
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§ 4231.3 Requirements for mergers and transfers.
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§ 4231.4 Preservation of accrued benefits.
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§ 4231.5 Valuation requirement.
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§ 4231.6 Plan solvency tests.
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§ 4231.7
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§ 4231.8 Notice of merger or transfer.
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§ 4231.9 Request for compliance determination.
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§ 4231.10 Actuarial calculations and assumptions.
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