(a) Variable-rate premium exemptions. A plan described in any of (a)(1)-(a)(3) of this section is not required to determine or report its unfunded vested benefits under
§ 4006.4 and does not owe a variable-rate premium under
§ 4006.3(b).
(1) Plans without vested participants. A plan is described in this paragraph if it does not have any participants with vested benefits as of the UVB valuation date.
(3) Plans terminating in standard terminations. The exemption for a plan described in this paragraph is conditioned upon the plan's making a final distribution of assets in a standard termination. If a plan is ultimately unable to do so, the exemption is revoked and all variable-rate amounts not paid pursuant to this exemption are due retroactive to the applicable due date(s). A plan is described in this paragraph if—
(i) The plan administrator has issued notices of intent to terminate the plan in a standard termination in accordance with
section 4041(a)(2) of ERISA; and
(ii) The proposed termination date set forth in the notice of intent to terminate is on or before the UVB valuation date.
(b) Special rule for determining vested benefits for certain large plans. With respect to a plan that had 500 or more participants on the last day of the plan year preceding the premium payment year, if an enrolled actuary determines pursuant to
§ 4006.4(a) that the actuarial value of plan assets equals or exceeds the value of all benefits accrued under the plan (valued at the interest rate prescribed in
§ 4006.4(b)(1)), the enrolled actuary need not determine the value of the plan's vested benefits, and may instead report the value of the accrued benefits.
(c) Special rule for determining unfunded vested benefits for plans terminating in distress or involuntary terminations. A plan described in this paragraph may determine its unfunded vested benefits by using the special alternative calculation method set forth in this paragraph. A plan is described in this paragraph if it has issued notices of intent to terminate in a distress termination in accordance with
section 4041(a)(2) of ERISA with a proposed termination date on or before the last day of the plan year preceding the premium payment year, or if the PBGC has instituted proceedings to terminate the plan in accordance with
section 4042 of ERISA and has sought a termination date on or before the last day of the plan year preceding the premium payment year. Pursuant to this paragraph, a plan shall determine its unfunded vested benefits in accordance with the alternative calculation method in
§ 4006.4(c), except that—
(1) The calculation shall be based on the Form 5500, Schedule B, for the plan year which includes (in the case of a distress termination) the proposed termination date or (in the case of an involuntary termination) the termination date sought by the PBGC, or, if no Schedule B is filed for that plan year, on the Schedule B for the immediately preceding plan year;
(2) All references in
§ 4006.4(c) and
§ 4006.4(d) to the first day of the plan year preceding the premium payment year shall be deemed to refer to the first day of the plan year for which the Schedule B was filed;
(3) The value of the sum of the plan's current liability as of the first day of the plan year preceding the premium payment year for vested benefits of active and terminated vested participants not in pay status, computed in accordance with
section 302(d)(7) of ERISA and
section 412(l)(7) of the Code, shall be adjusted (in lieu of the adjustment required by
§ 4006.4(c)(1)) by multiplying that value by the sum of 1 plus the product of .07 and the number of years (rounded to the nearest hundredth of a year) between the date of the Schedule B data and (in the case of a distress termination) the proposed termination date or (in the case of an involuntary termination) the termination date sought by the PBGC; and
(4) The exponent, “Y,” in the time adjustment formula of
§ 4006.4(c)(5) shall be deemed to equal the number of years (rounded to the nearest hundredth of a year) between the date of the Schedule B data and the last day of the plan year preceding the premium payment year.
(d) Special determination date rule for new and newly-covered plans. In the case of a new plan or a newly-covered plan, all references in
§§ 4006.3, 4006.4, and paragraphs (a) and (b) of this section to the last day of the plan year preceding the premium payment year shall be deemed to refer to the first day of the premium payment year or, if later, the date on which the plan became effective for benefit accruals for future service, and for purposes of determining the plan's premium, the number of plan participants, and (for a single-employer plan) the amount of the plan's unfunded vested benefits and the applicability of any exemption or special rule under paragraph (a) or (b) of this section, shall be determined as of such first day or later date.
(b) Reporting exemption for plans paying capped variable-rate premium. A plan that qualifies for the variable-rate premium cap described in
ERISA section 4006(a)(3)(H) is not required to determine or report its unfunded vested benefits under
§ 4006.4 if it reports that it qualifies for the cap and pays a variable-rate premium equal to the amount of the cap.
(c) Participant count date; in general. Except as provided in paragraphs (d) and (e) of this section, the participant count date of a plan for a plan year is the last day of the prior plan year.
(d) Participant count date; new and newly-covered plans. The participant count date of a new plan or a newly-covered plan for a plan year is the first day of the plan year. For this purpose, a new plan's first plan year begins on the plan's effective date.
(e) Participant count date; certain mergers and spinoffs.
(2) A plan is described in this paragraph (e)(2) for a plan year if —
(i) The plan engages in a merger or spinoff that is not
de minimis pursuant to the regulations under
section 414(l) of the Code (in the case of single-employer plans) or pursuant to part 4231 of this chapter (in the case of multiemployer plans), as applicable;
(ii) The merger or spinoff is effective at the beginning of the plan year; and
(iii) The plan is the transferee plan in the case of a merger or the transferor plan in the case of a spinoff.
(f) Proration for certain short plan years. The premium for a plan that has a short plan year described in this paragraph (f) is prorated by the number of months in the short plan year (treating a part of a month as a month). The proration applies whether or not the short plan year ends by the premium due date for the short plan year. For purposes of this paragraph (f), there is a short plan year in the following circumstances:
(1) New or newly covered plan. A new plan becomes effective less than one full year before the beginning of its second plan year, or a newly-covered plan becomes covered on a date other than the first day of its plan year. (Cessation of coverage before the end of a plan year does not give rise to proration under this section.)
(2) Change in plan year. A plan amendment changes the plan year, but only if the plan does not merge into or consolidate with another plan or otherwise cease its independent existence either during the short plan year or at the beginning of the full plan year following the short plan year.
(3) Distribution of assets. The plan's assets (other than any excess assets) are distributed pursuant to the plan's termination.
(4) Appointment of trustee. The plan is a single-employer plan, and a plan trustee is appointed pursuant to
section 4042 of ERISA.
(g) Alternative premium funding target. A plan's alternative premium funding target is the vested portion of the plan's funding target under
ERISA section 303(d)(1) that is used to determine the plan's minimum contribution under
ERISA section 303 for the premium payment year, that is, the amount that would be determined under
ERISA section 303(d)(1) if only vested benefits were taken into account. A plan may elect to compute unfunded vested benefits using the alternative premium funding target instead of the standard premium funding target described in
§ 4006.4(b)(2), and may revoke such an election, in accordance with the provisions of this paragraph (g). A plan must compute its unfunded vested benefits using the alternative premium funding target instead of the standard premium funding target described in
§ 4006.4(b)(2) if an election under this paragraph (g) to use the alternative premium funding target is in effect for the premium payment year.
(1) An election under this paragraph (g) to use the alternative premium funding target for a plan must specify the first plan year to which it applies and must be filed by the plan's variable-rate premium due date for that plan year. The first plan year to which the election applies must begin at least five years after the first plan year to which a revocation of a prior election applied. The election will be effective—
(i) For the plan year for which made and for all plan years that begin less than five years thereafter, and
(ii) For all succeeding plan years until the first plan year to which a revocation of the election applies.
(2) A revocation of an election under this paragraph (g) to use the alternative premium funding target for a plan must specify the first plan year to which it applies and must be filed by the plan's variable-rate premium due date for that plan year. The first plan year to which the revocation applies must begin at least five years after the first plan year to which the election applied.
Source credit, amendments & notes
[61 FR 34016, July 1, 1996, as amended at 62 FR 60428, Nov. 7, 1997; 65 FR 75163, Dec. 1, 2000; 71 FR 31081, June 1, 2005; 73 FR 15075, Mar. 21, 2008]
29 C.F.R. § 4006.5 — Exemptions and special rules. · CFR 2008 annual edition (revised as of 2008-07-01) · https://pensionresource.website/EAMain?content=EAMain.Law&id=cfr29-4006.5&asof=2008-07-01 · printed Oct 19, 2026