Multiemployer plan receives a five-year funding extension

Plain-English summary

A multiemployer pension plan requested more time to amortize specified unfunded liabilities. The plan's actuary certified that without the relief the plan would face an accumulated funding deficiency, the sponsor had adopted a plan to improve funding, and the plan was expected to have enough assets to pay benefits and expenses during the extended period. The IRS approved a five-year automatic extension under section 431(d)(1) for the eligible amortization charge bases covered by the application. The ruling expects the plan to use lawful and reasonable actuarial assumptions and obtain any required approvals for changes in assumptions or funding methods. It also warns that amendments increasing benefits, accruals, vesting, or related retirement-plan liabilities while the extension remains in effect can trigger consequences under section 412(c)(7).

Ruling snapshot

• Question: May the multiemployer plan extend the amortization periods for its specified unfunded liabilities?
• Outcome: approved
• Key authorities: IRC §§ 412(c)(7), 431(b), and 431(d)(1); ERISA §§ 302(c)(7) and 304(b)

Full text (IRS public release)

Significant Index Number 0431.00-00

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

OCT 05 2017

201752217

Re:
        (Plan No.     ) (“Plan”)
        EIN:

Taxpayer =

Dear             :

This letter constitutes notice that approval has been granted for your request for
a 5-year automatic extension for amortizing the unfunded liabilities as of
                 , for the above-named Plan 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
                 . This extension applies to the eligible amortization charge
bases, established as of                 .

A copy of the list of amortization bases to be extended under this ruling, with a
total outstanding balance of                 as of                 , is shown in the
following table:

201752217

Type of Base | Date Established | Amort. Amount (Before Extension) | Remaining Period 1/1/20  (Before Ext.) | Outstanding Balance 1/1/20

The extension of the amortization periods of the unfunded liabilities of the Plan
has been 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     succeeding plan years,

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

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201752217

    (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 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
was applied in accordance with applicable law and regulations. And 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. In addition, we are not
expressing any opinion as to the accuracy of any material submitted with your
request.

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.

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.

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201752217

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 in this matter, please contact
(ID#          ) at                  .

Sincerely yours,

David M. Ziegler
Manager, EP Actuarial Group 2

cc:

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