IRS issues temporary, proposed regs, application procedures for reduction of multiemployer DB plan benefits; Special Master appointed


The IRS has issued temporary and proposed regulations governing the suspension of benefits by multiemployer defined benefit (DB) plans under Code Sec. 432(e)(9), which was added by the Multiemployer Pension Reform Act of 2014 (MPRA), Division O of the Consolidated and Further Continuing Appropriations Act (P.L. 113-235). The proposed regulations and the temporary regulations together provide guidance in implementing the statutory provisions of MPRA, according to the IRS. The IRS has also issued a revenue procedure outlining the application process for a plan seeking approval of a reduction of benefits. A Special Master has been appointed.


Under Code Sec. 432(e)(9), a sponsor of a multiemployer pension plan in critical and declining status may apply to the Treasury Department for approval to implement a suspension of benefits, which would result in a reduction of benefits currently being paid to retirees. Plans in critical and declining status are projected to have insufficient funds, at some point in the future, to pay the full benefits that participants and beneficiaries will be entitled to under the plans. Only plans that have already taken all reasonable measures to address their financial problems may consider reducing benefits. MPRA requires the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, to approve or deny applications by these plans to reduce benefits.

Note that some plan participants are protected from such a reduction, including retirees 80 years of age and older (partial protection beginning at age 75), and participants receiving disability benefits.

Temporary regs

The temporary regulations are effective immediately. The IRS states that the temporary regulations provide sufficient guidance to enable a plan sponsor to prepare and submit an application for suspension of benefits, and to enable the Department of the Treasury to begin the processing of the application. The temporary regulations provide guidance regarding the meaning of the term “suspension of benefits,” the general conditions for a suspension of benefits, and the implementation of a suspension after a participant vote. The temporary regulations are effective June 19, 2015 and applicable on or after June 17, 2015.

Proposed regs

The proposed regulations go further, and are not immediately applicable. They provide additional guidance, including guidance relating to the standards that will be applied in reviewing an application for suspension of benefits, and the statutory limitations on a suspension of benefits. The proposed regulations would permit a phase-in of the reduction that is scheduled in a definite, pre-determined manner as of a specified future date(s). The proposed regulations are proposed to be effective on and after the date of publication in the Federal Register of the final regulations. Until the final regulations are issued, the proposed regulations may not be relied on.

After consideration of public comments on the temporary and proposed regulations, the IRS intends to integrate the two sets of regulations and issue a single set of final regulations.

Comments sought

Comments must be received by August 18, 2015. Submissions should be sent to: CC:PA:LPD:PR (REG-102648-15), Room 5205, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8:00 a.m. and 4:00 p.m. to: CC:PA:LPD:PR (REG-102648-15), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC, or sent electronically via the Federal eRulemaking Portal at (IRS REG-102648-15). A public hearing will be on September 10, 2015, in the Amphitheater of the Ronald Reagan Building and International Trade Center, 1300 Pennsylvania Ave., NW., Washington, DC.

Revenue procedure

The new revenue procedure sets out the specifics of the application process for approval of a proposed benefit suspension, including the information that must be provided in the application. The IRS notes that a plan sponsor may be required to provide additional information after the application is submitted. The revenue procedure includes a model notice informing participants and beneficiaries that the plan sponsor is proposing a benefit suspension, a power of attorney and declaration of representative before the Treasury Department, and a checklist (which must be included with the application). The model notice may be used by a plan sponsor proposing a benefit suspension to satisfy the statutory notice requirements concerning the content and readability of the notice.

The IRS explains that the provisions of the revenue procedure should be interpreted in a manner consistent with the provisions of the proposed and temporary regulations. Applications will be accepted on or after June 19, 2015.

The IRS expects that applications will not be approved prior to consideration of public comments on the proposed and temporary regulations, and subsequent issuance of final regulations. If a plan sponsor chooses to submit an application before the issuance of final regulations, it may need to revise the proposed suspension (and potentially the related notices to plan participants) or supplement the application to take into account any differences in the regulatory provisions that might be included in the final regulations. In addition, if the final regulations differ from the proposed and temporary regulations in a way that affects the revenue procedure’s provisions, or if changes to the application process are identified that would be necessary or helpful, the IRS will issue a revised revenue procedure taking those changes into account.

Special Master appointed

The temporary regulations provide that the Secretary of the Treasury may appoint a Special Master for purposes of Code Sec. 432(e)(9). The Treasury Department has announced the appointment of attorney Kenneth Feinberg as a Special Master to help provide what it describes as a dedicated, impartial and informed review of applications proposing to reduce pension benefits and to provide a single point of contact for affected stakeholders.

Feinberg’s prior federal appointments have included serving as Special Master for TARP Executive Compensation following the financial crisis, Administrator of the Gulf Coast Claims Facility following the Deepwater Horizon oil spill, and Special Master of the Federal September 11th Victim Compensation Fund. He also administered victim compensation and memorial funds following the Boston Marathon bombings and the Virginia Tech shootings.

Comment. A Special Master is viewed as prudent because the power to reduce benefits to current retirees absent insolvency is unprecedented.

Source: IRS temporary and proposed regulations; IRS Rev. Proc. 2015-34.

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