Plan receives five-year extension to amortize unfunded liabilities

Plain-English summary

A multiemployer plan requested an automatic extension for amortizing specified unfunded liabilities arising from plan amendments, actuarial losses, and changes in assumptions. The IRS approved a five-year extension under section 431(d)(1). The plan's actuary certified that without relief the plan would have an accumulated funding deficiency in the current or one of the next nine plan years, that the sponsor had adopted a funding-improvement plan, and that projected assets could timely pay expected benefits and expenses during the extended period. The required participant notice also had been provided. The IRS cautioned that amendments increasing benefits, accruals, vesting, or liabilities while the extension remained in place could trigger consequences under section 412(c)(7).

Ruling snapshot

• Question: Did the plan qualify for a five-year extension of the amortization periods for its identified unfunded-liability bases?
• Outcome: approved
• Key authorities: IRC §§ 412(c)(7), 431(b), 431(d)(1); ERISA §§ 302(c)(7), 304(b); Rev. Proc. 2010-52

Full text (IRS public release)

Significant Index No. 0431.00-00 201748013

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

SEP 0 7 2017

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

T:EP:RA:A2
Re: (Plan No )
(“Plan”)
EIN: -
Plan Sponsor =
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, or
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, and applies to the eligible amortization charge bases as
identified in your application submission that are established as of January 1,
shown in the table below. This approval will extend the amortization periods for 5

years.

as

Outstanding

Date
Type of Base Established Balance as of

Plan amendment :
Plan amendment ___J
Actuarial Loss . :
Actuarial Loss a
Actuarial Loss
Actuarial Loss

Actuarial Loss _
Change in assumptions
Actuarial loss :

Actuarial loss _


201748013

Outstanding

Type of Base Date
(continued) Established | Balance as of

Change in assumptions _
Change in assumptions _ |
Actuarial loss
Change in assumptions
Actuarial loss

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.

In granting this ruling, it is expected that:

(i) 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,
(ii) 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,

and

(iii) the plan sponsor obtained the appropriate approvals for any changes in
assumptions or funding methods (whether through an individual private letter
ruling or by qualifying for automatic approvals available in the Code, Treasury

regulations or other generally applicable guidance).

Furthermore, we are not expressing any opinion as to the accuracy of any material
submitted with your request.

201748013

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. In accordance

with the power of attorney on file in this office, a copy of this ruling has not been sent
to your authorized representative. If necessary, you should forward a copy directly to

him.

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