Multiemployer plan amortization extensions approved

Plain-English summary

A multiemployer pension plan requested automatic extensions for amortizing three unfunded liability bases beginning with its 2023 plan year. The plan submitted an actuary's certification that it met the statutory funding, improvement-plan, asset, and notice conditions. The IRS approved a five-year extension for each listed amortization base under section 431(d)(1). The IRS also considered a 2018 amendment that changed retirement ages for later participants. Because the amendment did not change the present value of benefits, the IRS agreed that it did not increase plan liabilities for purposes of section 412(c)(7).

Ruling snapshot

• Question: May the plan extend three amortization periods by five years, and did its 2018 amendment increase liabilities under section 412(c)(7)?
• Outcome: Approved
• Key authorities: IRC §§ 411(d)(6), 412(c)(7), 431(d), 432(e)(8), and 433(d); ERISA §§ 302 and 304; Rev. Proc. 2010-52

Full text (IRS public release)

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

MAR 14 2025

Release Number: 202523024
Release Date: 6/6/2025 UIL Code: 0431.00-00

Re: Request for automatic extension of amortization periods

Taxpayer =
(EIN: - )

Plan =
(EIN: - ; Plan No: )

Dear :

This letter constitutes notice that approval has been granted for your request for an
automatic extension for amortizing the unfunded liabilities as of September 1, 2023, 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
September 1, 2023 and applies to the eligible amortization charge bases as identified in
your application submission and shown below. This approval will extend the
amortization period of each amortization charge base shown below for 5 years.

Amortization Base Table

The extension of the amortization periods of 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) of the Code.

The Plan has submitted the required information to meet the criteria in Section
431(d)(1)(B) of the Code, including a certification from the Plan's actuary that:

(i) Absent the extension under Section 431(d)(1)(A) of the Code, that 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 Section 431(d)(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).

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.

Section 412(c)(7)(A) of the Code states that no amendment of a plan which increases
the liabilities of the plan by reason of any increase in benefits, any change in the accrual
of benefits, or any change in the rate at which benefits become nonforfeitable under the
plan shall be adopted if a waiver under this subsection or an extension of time under
section 431(d) or section 433(d) is in effect with respect to the plan, or if a plan
amendment described in subsection 412(d)(2) which reduces the accrued benefit of any
participant has been made at any time in the preceding 12 months (24 months in the
case of a multiemployer plan). If a plan is amended in violation of the preceding
sentence, any such waiver, or extension of time, shall not apply to any plan year ending
on or after the date on which such amendment is adopted.

Section 412(c)(7)(B) of the Code provides an exception and states that section
412(c)(7)(A) of the Code shall not apply to any plan amendment which (i) the Secretary
determines to be reasonable and which provides for only de minimis increases in the
liabilities of the plan, (ii) only repeals an amendment described in subsection 412(d)(2),
or (iii) is required as a condition under part I of subchapter D of chapter 1.

On May 1, 2014, the Internal Revenue Service (“Service”) issued a letter ruling
approving the extension of certain eligible amortization charge bases, effective with the
plan year beginning September 1, 2012. The Plan subsequently adopted an
amendment, effective with the plan year beginning September 1, 2018. The
amendment, in relevant part, increased the normal retirement age and unreduced early
retirement age, for those whose first hour under the Plan was on or after September 1,
2018. The Plan, at that time, was being funded using the entry age normal actuarial cost
method with a replacement-life methodology for calculating the entry age normal cost.

The Taxpayer represents that no participant in the September 1, 2018 valuation was yet
subject to the post-September 1, 2018 benefit accruals, and the present value of
benefits did not change. However, due to the replacement-life methodology used, the
present value of future normal costs decreased and the reduction in the present value of
future normal costs led to a corresponding increase in the entry age normal actuarial
accrued liability.

Section 412(c)(7) of the Code does not differentiate or bifurcate an increase in liability
between past service and future service. Further, the measurement of any increase in
liability should be independent from the funding method that is used. Therefore, any
increase in liability for purposes of section 412(c)(7) of the Code is most reasonably
measured as an increase in the present value of benefits¹. Therefore, the Service
agrees the amendment that became effective for the plan year beginning September 1,
2018, did not increase the liabilities of the Plan for purposes of section 412(c)(7) of the
Code.

Please note that any amendment that increases liabilities for a profit-sharing plan or any
other retirement plan (whether qualified or nonqualified) 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.

We are not expressing any opinion as to the accuracy or acceptability of any
calculations or material submitted with the Taxpayer's request. Furthermore, we are not
expressing any opinion whether any of the benefit provisions changed by the Plan, past
or future,² constitute forfeitures of accrued benefits under Section 411(d)(6) of the Code,
or are adjustable benefits under Section 432(e)(8) of the Code.

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

Pursuant to a power of attorney on file with this office, a copy of this letter ruling is being
sent to your authorized representative. Additionally, we have sent a copy of this letter to
the Manager, Classification Group 4 in Houston, Texas.

¹ Present value of benefits = actuarial accrued liability + present value of future normal costs

² Amendment No. 8 adopted September 11, 2024

This letter ruling may be revoked or modified retroactively if there was a misstatement
or omission of controlling facts, the facts at the time of the transaction are materially
different from the controlling facts on which the letter ruling was based, or the
transaction involves a continuing action or series of actions, and the controlling facts
change during the course of the transaction.

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

Sincerely yours,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2

cc:
Manager, Classification Group 4
Houston, Texas