Multiemployer plan receives five-year funding extensions

Plain-English summary

A multiemployer pension plan requested automatic extensions for amortizing 18 unfunded-liability charge bases established as of January 1, 2015. Its actuary certified that without relief the plan would face an accumulated funding deficiency, the sponsor had adopted a funding-improvement plan, the plan could pay expected benefits and expenditures during the extended period, and the required notice had been given. The IRS approved five-year extensions under section 431(d)(1). The letter warns that benefit, accrual-rate, or vesting changes while the extensions remain in place can trigger the consequences in section 412(c)(7).

Ruling snapshot

• Question: Does the multiemployer plan qualify for automatic extensions of its amortization periods for specified unfunded liabilities?
• Outcome: Approved, with five-year extensions for the 18 listed amortization charge bases.
• Key authorities: IRC §§ 412(c)(7) and 431(d)(1); ERISA §§ 302(c)(7) and 304; Rev. Proc. 2010-52

Full text (IRS public release)

[Redaction note: the IRS release blanks the plan name and number, employer identification number, plan sponsor, addressee, contact information, initial amounts, outstanding balances, and parts of the dates in the table. Unreadable portions are marked [illegible].]

Significant Index No. 0431.00-00

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

201807011

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

NOV 22 2017

SET:EP:RA:A2

Re: [illegible] (Plan No. [illegible]) (“Plan”)
EIN: [illegible]

Plan Sponsor = [illegible]

Dear [illegible]:

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, 2015, 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, 2015, and applies to the eligible amortization charge bases as identified in your application submission that are established as of January 1, 2015, as shown in the table on page 2. 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.

201807011

2

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.

201807011

3

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, to the Manager, EP Compliance Unit in Chicago, Illinois, and to your authorized representative pursuant to a power of attorney on file in this office.

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# [illegible]) at ([illegible]).

Sincerely yours,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2

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