CFR 1997 annual edition (revised as of 1997-07-01) · in effect Jul 1, 1997 to Jul 1, 1998
(a) Significant transfers. A significant transfer satisfies the plan solvency requirement of
section 4231(b)(3) of ERISA and
§ 4231.3(a)(3)(i) if all of the following requirements are met by each plan involved in the transfer:
(1) Expected contributions shall 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 transfer.
(2) The fair market value of plan assets immediately after the transfer shall equal or exceed the total amount of expected benefit payments during the first five plan years beginning on or after the proposed effective date of the transfer.
(3) Expected contributions for the first plan year beginning on or after the proposed effective date of the transfer shall equal or exceed expected benefit payments for that plan year.
(4) Contributions for the amortization period shall equal or exceed unfunded accrued benefits plus expected normal costs.
(i) Notwithstanding
paragraph (c)(4) of this section,
unfunded accrued benefits means the excess of the present value of accrued benefits over the fair market value of the assets, determined on the basis of the actuarial valuation required under
§ 4231.5(b).
(ii) Amortization period means either 25 plan years or 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. The actuary may select either period.
(b) Mergers and non-significant transfers. A merger or non-significant transfer satisfies the plan solvency requirement of
section 4231(b)(3) of ERISA and
§ 4231.3(a)(3)(i) if, for the merged plan or for each plan that continues after the transfer—
(1) The fair market value of plan assets immediately after the merger or transfer equals or exceeds five times the benefit payments in 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 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.
(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 shall be determined by assuming that contributions will equal contributions received in or accrued for the last full plan year ending before the date on which the notice of merger or transfer is filed with the PBGC. Contributions shall be adjusted, however, to reflect any change in the rate of employer contributions that has been negotiated (whether or not in effect), or a 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 shall be determined under the funding method and assumptions 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 is using an aggregate funding method, normal costs shall be determined under the entry age normal method.
(3) Expected benefit payments shall be determined by assuming that current benefits remain in effect and that all scheduled increases in benefits occur.
(4) The fair market value of plan assets immediately after the merger or transfer shall be based on the most recent data available to the plan sponsor immediately before the date on which the notice is filed.
(5) Expected investment earnings shall be determined using the same interest assumption used for determining the minimum funding requirement under
section 412 of the Code.
(6) Expected expenses shall 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 shall 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.