Retirement Plans Newsletter

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[Official Guidance]

Text of IRS Final Regs: Suspension of Benefits Under the Multiemployer Pension Reform Act of 2014
133 pages. "The preamble to the June 2015 temporary regulations states that it is expected that no application proposing a benefit suspension will be approved prior to the issuance of final regulations, and that, if a plan sponsor chooses to submit an application for approval of a proposed benefit suspension before the issuance of final regulations, then the plan sponsor 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 final regulations ... [T]he provisions of the June 2015 proposed regulations and the September 2015 proposed regulations ... are adopted by this Treasury decision, subject to certain changes ... This Treasury decision also removes the temporary regulations under 432(e)(9) that were published in June 2015 and September 2015. This Treasury decision does not contain final action on the February 2016 regulations....

"[T]the final regulations clarify that a suspension can take into account individual-level contingencies (such as retirement, death, or disability) for individuals who have not commenced benefits before the effective date of the suspension.... These final regulations define the term plan sponsor to mean the association, committee, joint board of trustees, or other similar group of representatives of the parties that establishes or maintains the multiemployer plan. However, in the case of a plan described in section 404(c), or a continuation of such a plan, the term plan sponsor means the association of employers that is the employer settlor of the plan ...

"The final regulations implement the requirement that a retiree representative must be selected for a plan with 10,000 or more participants. For purposes of determining whether a plan has 10,000 or more participants, the final regulations provide that the number of participants is the number reported on the most recently filed Form 5500... The final regulations also provide that the plan sponsor must select the retiree representative at least 60 days before the plan sponsor submits an application to suspend benefits and that the retiree representative must be a plan participant who is in pay status and may or may not be a plan trustee.... The final regulations require that, upon request, the plan sponsor must promptly provide the retiree representative with relevant information (such as plan documents and data) that is reasonably necessary to enable the retiree representative to perform the retiree representative's role, which includes, for example, the retiree representative's attendance at trustee meetings at which the suspension design is being developed.... The final regulations clarify that the plan must pay other reasonable expenses incurred by the retiree representative, such as any reasonable expenses incurred in communicating with the retired and deferred vested participants and beneficiaries of the plan about the proposed suspension ...

"Under the final regulations, a plan sponsor may not suspend benefits unless the plan sponsor makes initial and annual determinations that the plan is projected to become insolvent unless benefits are suspended, although all reasonable measures to avoid insolvency have been taken. These determinations are based on the non-exclusive list of factors described in section 432(e)(9)(C)(ii).... The final regulations provide that the plan sponsor must maintain a written record of its annual determinations in order to satisfy the annual plan sponsor determinations requirement....

"The final regulations contain new rules to clarify when different groups of participants and beneficiaries are treated as separate categories or groups for purposes of applying the equitable distribution requirement in the case of a proposed suspension of benefits under which an individual's benefits after suspension are calculated under a new benefit formula (rather than by reference to an individual's benefits before suspension)....

"The final regulations prescribe rules implementing the statutory notice requirements in section 432(e)(9)(F) that are generally the same as the rules set forth in the 2015 regulations.... The final regulations generally adopt the provisions of the 2015 regulations under which the plan sponsor of a plan in critical and declining status for a plan year that seeks to suspend benefits must submit an application for approval of the proposed suspension of benefits to the Treasury Department.... The final regulations provide that a complete application will be deemed approved unless, within 225 days after a complete application is received, the Treasury Department notifies the plan sponsor that its application does not satisfy one or more of the requirements for approval.... An application must be submitted electronically in a searchable format. The final regulations provide that, after receiving a submission, the plan sponsor will be notified within two business days whether the submission constitutes a complete application....

"The final regulations provide that, in any case in which a suspension of benefits with respect to a plan is made in combination with a partition of the plan under section 4233 of ERISA, the suspension of benefits is not permitted to take effect prior to the effective date of the partition....

"[T]hese final regulations clarify that eligible voters include terminated vested participants and retirees (but not alternate payees).... These final regulations set forth rules regarding the ballot package that is sent to eligible voters and the plan sponsor's responsibilities relating to ballots and related communications to participants and beneficiaries....

"These regulations are effective on [April 28, 2016, the date they are to be published in the Federal Register]."

(Internal Revenue Service [IRS])  

[Official Guidance]

Text of IRS Rev. Proc 2016-27: Application Procedures for Approval of Benefit Suspensions for Certain Multiemployer Defined Benefit Pension Plans Under Section 432(e)(9) (PDF)
32 pages. "This revenue procedure contains revised procedures for applications for a suspension of benefits under a multiemployer defined benefit pension plan that is in critical and declining status under Section 432(e)(9). These procedures replace the procedures set forth in Rev. Proc. 2015- 34, 2015- 27 I.R.B. 1218.

"The procedures set forth in this revenue procedure must be followed for applications submitted on or after April 26, 2016....

"The model notice in Appendix A of this revenue procedure replaces the model notice attached to Rev. Proc. 2015-34 for notices with respect to applications submitted under this revenue procedure.... As noted in Rev. Proc. 2015-34, plan sponsors that submit an application under that revenue procedure may need to revise the proposed suspension or supplement the application to take into account the final regulations and this revenue procedure."

(Internal Revenue Service [IRS])  

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