Multiemployer plan receives five-year extensions for unfunded-liability amortization

Plain-English summary

A multiemployer pension plan requested more time to amortize unfunded liabilities arising from plan amendments, actuarial losses, and actuarial assumption changes. The plan's actuary certified that without relief the plan would face an accumulated funding deficiency in the current or one of the next nine plan years. The plan sponsor had adopted a plan to improve its funding status, projected sufficient assets to pay expected benefits and expenses during the extended periods, and provided the required notice. The IRS approved five additional years for each listed amortization base under Section 431(d)(1). The ruling expects the plan to maintain lawful and reasonable actuarial assumptions and warns that benefit, accrual, or vesting increases while the extension remains in place can trigger consequences under Section 412(c)(7).

Ruling snapshot

• Question: Does the plan qualify for automatic five-year extensions of its listed unfunded-liability amortization periods?
• Outcome: Approved
• Key authorities: IRC §§ 431(b), 431(d)(1), 412(c)(7); ERISA §§ 304(b), 302(c)(7); 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

SEP 13 2018

SE:T:EP:RA:A2

Number: 201849017
Release Date: 12/7/2018

Re: [redacted] (“Plan”)
EIN: [redacted] / PN: [redacted]
Sponsor = [redacted]

Dear [redacted]:

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, [redacted], 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, [redacted], and applies to the eligible amortization charge bases as
identified in your application submission that are established as of January 1, [redacted], as
shown in the table below. This approval will extend the amortization periods for 5
years.

Type of Base | Initial Amount | Date Established | Remaining Period Before Extension | Outstanding Balance as of 1/1/[redacted] | Amortization Charge Before Extension
Plan Amendment (Non-Retiree) | [redacted] | 9/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment (Retiree) | [redacted] | 9/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment (Non-Retiree) | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment (Retiree) | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment (Non-Retiree) | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment (Retiree) | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment (Non-Retiree) | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment (Retiree) | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment (Non-Retiree) | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment (Retiree) | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment (Non-Retiree) | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment (Retiree) | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment (Non-Retiree) | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment (Retiree) | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment (Non-Retiree) | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment (Retiree) | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment (Non-Retiree) | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment (Retiree) | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Plan Amendment | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Actuarial Loss | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Actuarial Loss | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Actuarial Loss | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Actuarial Loss | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Actuarial Loss | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Actuarial Loss | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Actuarial Loss | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Actuarial Assumption Change | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Actuarial Loss | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Actuarial Loss | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Actuarial Loss | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]
Actuarial Assumption Change | [redacted] | 1/1/[redacted] | [redacted] | [redacted] | [redacted]

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.

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 Columbus,
Ohio, 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# [redacted]) at ([redacted]) [redacted].

Sincerely yours,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2

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