IRS Offers Relief for Troubled Multiemployer DB Plans

The IRS in Revenue Procedure 2015-34 has provided procedures by which multiemployer defined benefit plans that are in critical and declining status may apply for approval to suspend benefits. The IRS issued the revenue procedure on June 19, which is also the date on which the IRS began accepted the applications.

Application Procedures

Who may submit an application. An application must be submitted by the plan sponsor (generally, the plan’s joint board of trustees) or by its authorized representative. The application must be signed and dated by an authorized trustee who is a current member of the board of trustees or by an authorized representative of the plan sponsor.

Terms of proposed benefit suspension. The application must include a description of the proposed benefit suspension. The description must include the following information:

1. The effective date of the proposed suspension.
2. If the proposed suspension will expire by its own terms, the expiration date.
3. The categories or groups of individuals who would be affected by the proposed suspension and how those categories or groups are defined.
4. If the proposed suspension would have a different effect on different categories or groups, the description must describe the differences, including the formula used to calculate the amount of the proposed benefit suspension for individuals in each category or group.
5. Although any benefit suspension must take into account the limitations on a benefit suspension under Sections 432(e)(9)(D)(i), (ii) and (iii) of the Internal Revenue Code. The amount of the proposed benefit suspension for an individual must be calculated as if the limitations of Sections 432(e)(9)(D)(i), (ii) and (iii) did not apply to that individual.

Penalties of perjury. The revenue procedure includes the wording of a statement to be signed by an authorized trustee on behalf of the board of trustees that the application is submitted under penalties of perjury.

Public disclosure. A statement signed by an authorized trustee on behalf of the board of trustees acknowledging that, under Section 432(e)(9)(G)(ii), the application for approval of the proposed suspension of benefits, and the application’s supporting material, will be publicly disclosed through publication on the Treasury Department website.

Where to submit applications. Applications are to be submitted to http://www.treasury.gov/mpra.

Signatures. Any signature required by this revenue procedure must be submitted electronically in portable document format as part of the application. A stamped signature is forbidden.

Duty to correct. If, after submission of an application for a suspension of benefits, any error in that application is discovered, the plan sponsor must provide prompt notice to the Treasury Department.

Information To Be Included

The application must include:

• information in support of the plan sponsor’s method of satisfying the benefit suspension criteria under Section 432(e)(9);

• information to demonstrate that certain statutory limitations and notice requirements are satisfied with respect to the proposed suspension of benefits;

• a description of how the plan sponsor will satisfy the requirements of Section 432(e)(9)(F); and

• information about measures taken to avoid insolvency, as well as plan factors and how they were taken into account.

And — the IRS may ask a plan sponsor to provide additional information after it submits an application.

Not So Fast!

Although the IRS is now accepting such applications, that doesn’t mean that the IRS will approve them right away. The IRS will not approve them before it issues the regulations in final form, and that won’t happen until after a public hearing and IRS consideration of comments on the regulations. 

1. Plan sponsors that still choose to submit an application for approval of a proposed benefit suspension before the final regulations are issued may need to:
   
   1. revise the proposed suspension (and potentially the related notices to plan participants); or
2. 2. supplement the application to take into account any differences in the regulatory provisions that might be included in the final regulations.