Funding extensions post 6/30/05 pre 2008

[Effen]

PPA 06 grants 5-yr amortization extensions for some multiemployers:

Automatic extension of amortization period. The amortization extension procedure is changed for plan years beginning after 2007. The sponsor of a multiemployer plan can apply to the IRS for an automatic extension of the period required to amortize any unfunded past service liability, investment loss, or experience loss. The IRS must extend the amortization period for a period of up to five years. The plan's actuary must certify that: (1) absent the extension, the plan would have an accumulated funding deficiency in the current plan year or any of the nine succeeding plan years, (2) the plan sponsor has adopted a plan to improve the plan's funding status, (3) taking into account the extension, the plan is projected to have sufficient assets to pay its expected benefit liabilities and other anticipated expenditures in a timely manner, and (4) required advance notice has been provided to affected parties. The automatic extension will not apply with respect to applications submitted after December 31, 2014 (Code Sec. 431(d)(1) and ERISA Sec. 304(d)(1), as added by the Pension Act).

However, this doesn't take effect until Plan Years beginning after 2007. Previously, 412(e) was an option, but PPA appears to remove this option retroactively to 6/30/05.

Grandfather rule for benefits funded under an agreement. The changes discussed here do not apply to benefit increases funded under an agreement to which a multiemployer plan is a party if certain conditions are met. The agreement must have been approved by the PBGC prior to June 30, 2005. The agreement must provide for benefit increases, and provide special withdrawal liability rules similar to those available in the entertainment and construction industries (ERISA Sec. 4203(f)). A firm in either of these fields is allowed to withdraw from a plan without incurring any liability, unless it continues to perform work in the covered area of the sort performed by the covered employees (ERISA Sec. 4203(b), ©). In addition, the benefit increases must occur under a plan amendment adopted prior to June 30, 2005, and the plan must be funded in compliance with the agreement and any amendments to it (Act Sec. 206 of the Pension Act).

Does anyone know of any options available to a plan that will have a deficiency prior to 2007, but didn't submit a 412(e) filing prior to 6/30/05?

[Guest Brian4]

One interpretation is an amortization extension approved effective before the 2008 plan year, but applied for after June 2005, would use the old law interest rate through the 2007 plan year. Then, the new law interest rate effective starting with the 2008 plan year.

Plans can apply now, and discuss this issue with the IRS.