Pension plan received five extra years to amortize unfunded liabilities

Plain-English summary

A multiemployer pension plan applied for an automatic extension of the amortization periods for specified unfunded liabilities beginning with its 2016 plan year. The plan's actuary certified that a funding deficiency would otherwise arise within the current or next nine plan years, that a funding-improvement plan had been adopted, and that the plan should have enough assets to pay expected benefits and expenses during the extension. The required participant notice was also provided. The IRS approved a five-year extension under section 431(d)(1). It expected continued review of actuarial assumptions and cautioned that benefit or other liability-increasing amendments could trigger consequences while the extension remained effective.

Ruling snapshot

• Question: Did the multiemployer plan qualify to extend its unfunded-liability amortization periods?
• Outcome: Approved for five additional years.
• Key authorities: IRC §§ 412(c)(7), 431(b), 431(d)(1); Rev. Proc. 2010-52

Full text (IRS public release)

Significant Index No. 0431.00-00

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JUL 27 2017

Number: 201742035

TEP:RA:A2

Re: (Plan No. ) (“Plan”)
EIN: -
Taxpayer =
Dear

This letter constitutes notice that approval has been granted for your request for an
automatic extension for amortizing the unfunded liabilities as of January 1, 2016, for
the above-named Plan. This approval applies to such unfunded liabilities which are
described in sections 431(b)(2)(B) and 431(b)(4) of the Internal Revenue Code
(“Code”), and sections 304(b)(2)(B) and 304(b)(4) of the Employee Retirement Income
Security Act of 1974 (“ERISA”). This extension is effective with the plan year
beginning January 1, 2016, and applies to the eligible amortization charge bases as
identified in your application submission that are established as of January 1, 2016.
This approval will extend the amortization periods for 5 years.

The extension of the amortization periods of the unfunded liabilities of the Plan was
granted in accordance with section 431(d)(1) of the Code. Section 431(d)(1)(A) of the
Code requires the Secretary to extend the period of time required to amortize any
unfunded liability of a plan for a period of time (not in excess of 5 years) if the plan
submits an application meeting the criteria stated in section 431(d)(1)(B). The Plan
has submitted the required information to meet the criteria in section 431(d)(1)(B),
including a certification from the plan’s actuary that:

(i) Absent the extension under subparagraph (A), the plan would have an
accumulated funding deficiency in the current plan year or any of the 9
succeeding plan years,

(ii) The plan sponsor has adopted a plan to improve the plan's funding status,

(iii) The plan is projected to have sufficient assets to timely pay expected benefits
and anticipated expenditures over the amortization period as extended, and

(iv) The notice required under paragraph (3)(A) has been provided, in accordance
with Section 3.05 of Rev. Proc. 2010-52.

201742035

In granting this ruling, it is expected that the Plan's assumptions and methods
will be reviewed and updated as appropriate so that each prescribed
assumption is applied in accordance with applicable law and regulations. In
addition, it is expected that each other assumption is reasonable (taking into
account the experience of the Plan and reasonable expectations) and such
other assumptions, in combination, offer the best estimate of anticipated
experience under the Plan. Furthermore, we are not expressing any opinion as
to the accuracy of any material submitted with your request.

Your attention is called to section 412(c)(7) of the Code and section 302(c)(7) of
ERISA which describe the consequences that would result in the event the Plan
is amended to increase benefits, change the rate in the accrual of benefits or to
change the rate of vesting while the amortization extension remains in place.
Please note that any amendment that increases liabilities for a profit sharing
plan or any other retirement plans (whether qualified or unqualified) maintained
by the Trustees of the Plan and covering participants of the Plan to which this
ruling applies, would be considered an amendment for purposes of section
412(c)(7) of the Code and section 302(c)(7) of ERISA.

We have sent a copy of this letter to the Manager, EP Classification in
Baltimore, Maryland, and to the Manager, EP Compliance Unit in Chicago,
Illinois.

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3)
of the Internal Revenue Code provides that it may not be used or cited by
others as precedent.

If you require further assistance concerning this matter, please contact
(ID#          ) at (     )       -        .

Sincerely yours,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2

cc: Manager, EP Classification
Baltimore, Maryland

Manager, EP Compliance Unit
Chicago, Illinois