[Code of Federal Regulations]
[Title 26, Volume 5]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.412(b)-5]

[Page 644-645]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.412(b)-5  Election of the alternative amortization method of funding.

    (a) Alternative amortization method in general. Section 1013(d) of 
the Employee Retirement Income Security Act of 1974 provides an 
alternative method which may be used by certain multiemployer plans (as 
defined in section 414(f)) which were in existence on January 1, 1974, 
for funding certain unfunded past service liability. The multiemployer 
plans which may elect to use this alternative method are those plans (1) 
under which, on January 1, 1974, contributions were based on a 
percentage of pay, (2) which use actuarial assumptions with respect to 
pay that are reasonably related to past and projected experience, and 
(3) which use rates of interest that are determined on the basis of 
reasonable acturial assumptions. The unfunded past service liability to 
which this method applies is that amount existing as of the date 12 
months after the date on which section 412 first applies to the plan. 
The alternative method allows the plan to fund this liability over a 
period of 40 plan years by charging the funding standard account with an 
equal annual percentage of the aggregate pay of all participants in the 
plan instead of the level dollar charges required under section 
412(b)(2)(B). Paragraphs (b), (c), (d) and (e) of this section contain 
procedural rules for electing this alternative method.
    (b) Election procedure. To elect the alternative amortization 
method, a multiemployer plan must attach a statement to the annual 
report required

[[Page 645]]

under section 6058(a) for the plan year for which the election is made, 
stating that the alternative method for funding unfunded past service 
liability is being adopted. Advance approval from the Internal Revenue 
Service is not required. The alternative method must be adopted on or 
before the last day prescribed for filing the annual report 
corresponding to the last plan year beginning before January 1, 1982.
    (c) Charges to which the alternative amortization method is 
applicable. Once elected, the alternative amortization method is 
applicable to the unfunded past service liability existing as of the 
date 12 months after the date on which section 412 first applies to the 
plan. This results in charges to the funding standard account which are 
in lieu of--
    (1) Charges required under clause (i) of section 412(b)(2)(B), and
    (2) Charges required under clause (iii) of section 412(b)(2)(B) if 
the plan amendments referred to in such clause result in a net increase 
in the unfunded past service liability existing as of the date 12 months 
after the date on which section 412 first applies to the plan. Such 
charges generally will arise only with respect to plan amendments 
adopted in the first plan year to which section 412 applies.


If the election is made on an annual report corresponding to a plan year 
after the first plan year to which section 412 applies, recomputation of 
the contributions due in the prior years (to which section 412 applied) 
will be necessary.
    (d) Limitation. The sum of the charges described in this paragraph 
may not be less than the interest on the unfunded past service 
liabilities described in section 412(b)(2)(B) (i) and (iii), determined 
as of the date 12 months after the date on which section 412 first 
applies to the plan.
    (e) Reporting requirements. Each annual report required by section 
6058(a) and periodic report of the actuary required by section 6059 must 
include all additional information relevant to the use of the 
alternative amortization method as may be required by the applicable 
forms and the instructions for such forms.

[T.D. 7702, 45 FR 40113, June 13, 1980]