Troubled Multiemployer Plans Addressed In Rules on Benefit Suspensions, Partitions


The IRS and the PBGC issued proposed and interim final regulations regarding multiemployer pension plan benefit suspensions and plan partitions.

In temporary (T.D. 9723; RIN 1545-BM73) and proposed (REG-102648-15; RIN 1545-BM66) regulations, the Treasury Department and Internal Revenue Service provided guidance June 17 on benefit suspensions allowed by the Multiemployer Pension Reform Act. The proposed regulations would affect active, retired and deferred vested participants and beneficiaries of multiemployer plans that are in critical and declining status as well as employers contributing to, and sponsors and administrators of, those plans.

Also June 17, the IRS issued Revenue Procedure 2015-34, which describes procedures for a multiemployer plan in critical and declining status to apply for approval of a benefit suspension. The revenue procedure also provides a model notice that plan sponsors proposing to suspend benefits can use to fulfill requirements to notify plan participants and beneficiaries.

In an interim final rule (RIN 1212-AB29), the Pension Benefit Guaranty Corporation prescribed the application process and notice requirements for partitions of eligible multiemployer plans.

The agencies, along with the Department of Labor, have been under tight deadlines to issue guidance under the MPRA, which was signed into law and became effective in late 2014.

In a related development June 17, Kenneth R. Feinburg, who has held key positions administering victim compensation and other claims related to some of the nation's biggest tragedies of the past 15 years, was named by Treasury to oversee the department's implementation of the MPRA, including review of benefit reduction applications.

Suspending Benefits

Under the IRS's temporary regulations, a plan sponsor of a multiemployer plan in critical and declining status for a plan year can implement a suspension of benefits by plan amendment.

Once a plan is amended to suspend benefits, a plan can pay reduced benefits only if the plan's terms are consistent with tax code Section 432(e)(9), the temporary regulations said.

“The temporary regulations provide that the term suspension of benefits means the temporary or permanent reduction, pursuant to the terms of the plan, of any current or future payment obligation of the plan with respect to any participant under the plan,” the rules said.

The suspension can apply to a plan participant regardless of whether the participant, beneficiary or alternate payee had started receiving benefits prior to the effective date of the suspension, the IRS said.

The temporary rules also provide that a retiree representative must be selected for plans with 10,000 or more participants.

“The role of the retiree representative is to advocate for the interests of the retired and deferred vested participants and beneficiaries of the plan throughout the suspension approval process,” the IRS said.

Excerpted from a story that ran in Pension & Benefits Daily (06/18/2015).

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