IRS Issues Revised Procedures on Applications for Benefit Suspensions for Plans in Critical and Declining Status | Practical Law

IRS Issues Revised Procedures on Applications for Benefit Suspensions for Plans in Critical and Declining Status | Practical Law

The Internal Revenue Service (IRS) issued Revenue Procedure 2017-43, which modifies the procedures on applications for benefit suspensions under multiemployer defined benefit pension plans in critical and declining status. The new revenue procedure supersedes Revenue Procedure 2016-27.

IRS Issues Revised Procedures on Applications for Benefit Suspensions for Plans in Critical and Declining Status

by Practical Law Employee Benefits & Executive Compensation
Published on 17 Jul 2017 • USA (National/Federal)
The Internal Revenue Service (IRS) issued Revenue Procedure 2017-43, which modifies the procedures on applications for benefit suspensions under multiemployer defined benefit pension plans in critical and declining status. The new revenue procedure supersedes Revenue Procedure 2016-27.
On July 12, 2017, the IRS issued Revenue Procedure 2017-43, which modifies the procedures on applications for suspension of benefits under multiemployer defined benefit pension plans that are in critical and declining status under Section 432(e)(9) of the Internal Revenue Code (Code) (26 U.S.C. § 432(e)(9)). It also includes a revised:
  • Model notice that plan sponsors may use to satisfy the notification requirements.
  • Power of Attorney and Declaration of Representative Before the Department of the Treasury.
  • Checklist to help applicants ensure that their application is complete.
Revenue Procedure 2017-43 supersedes Revenue Procedure 2016-27, but largely adopts its application procedures. Revenue Procedure 2017-43 applies to applications submitted on or after September 1, 2017.

Multiemployer Pension Reform Act (MPRA)

Code Section 432(e)(9), as amended by the MPRA, allows multiemployer defined benefit plans in critical and declining status to suspend benefits if certain requirements are met (26 U.S.C. § 432(e)(9); see Legal Update, President Signs Bill Reforming Multiemployer Pension Plan Rules). Under the MPRA, the Secretary of the Treasury must approve a proposed suspension if the plan is eligible and the proposed suspension meets the statutory requirements.
In April 2016, the Treasury Department and IRS published final regulations under Section 432(e)(9) and issued Revenue Procedure 2016-27 (see Legal Update, IRS Issues Final Suspension of Benefits Regulations Under MPRA).

Revised Procedures

Application Procedures

Regarding the duty to correct an error in a submitted application, Revenue Procedure 2017-43 adds language allowing the Treasury Department to request additional materials from the plan sponsor to correct the error.

Plan Eligibility

Revenue Procedure 2017-43 modifies the information required to demonstrate that the plan is eligible for a suspension. Under the revenue procedure, the application must demonstrate that:
  • The plan is eligible for suspension, providing supporting information including the:
    • plan actuary's certification of critical and declining status; and
    • plan actuary's certification that the plan is projected to avoid insolvency, taking into account the proposed suspension.
The certifications must include as supporting documentation a plan-year-by-plan-year projection of the available resources and the benefits that are due under the plan. The projection must identify, among other items, withdrawal liability payments. Revenue Procedure 2017-43 adds a new requirement that the projection separately identify the payments that are attributable to prior withdrawals and expected future withdrawals.

Statutory Requirements for Benefit Suspension

To demonstrate that the proposed suspension meets the statutory requirements, the application must show that limitations on individual suspensions are satisfied. To do so, the application must include a sample calculation applying the Code's:
Under Revenue Procedure 2016-27, applications had to include sample calculations regarding the guarantee-based limitation and disability-based limitation for an individual in each category or group that was treated differently under the suspension. Revenue Procedure 2017-43 simplifies the requirement by only requiring the sample calculations for:
  • An individual currently receiving benefits.
  • A contingent beneficiary of an individual currently receiving benefits.
  • A future retiree.
Revenue Procedure 2017-43 also modifies the section regarding sample calculations applying the age-based limitation. The revenue procedure specifies that sample calculations must be provided for:
  • A retiree or beneficiary who has commenced benefits as of the proposed suspension's effective date and who is between ages 75 and 79 on the last day of the month containing the proposed suspension's effective date.
  • A beneficiary of a retiree described above.
  • An individual who has not commenced benefits as of the proposed suspension's effective date.
Additionally, Revenue Procedure 2017-43 modifies the section requiring that a proposed suspension be equitably distributed. The revenue procedure adds language exempting applications related to a proposed partition of a plan under Section 4233 of ERISA (29 U.S.C. § 1413) from having to provide information that would otherwise be required to satisfy the equitable distribution requirement.
Finally, Revenue Procedure 2017-43 clarifies the categories of individuals for which the application must include sample notices.

Other Changes

Revenue Procedure 2017-43 contains other changes to the application procedures, including:
  • Requiring, rather than permitting, the application to include a narrative statement of the reasons that the plan is in critical and declining status.
  • Requiring the application to include the accountant's report under Section 103(a)(3) of ERISA (29 U.S.C. § 1023(a)(3)) from the most recently filed annual return.
  • Requiring that an application that is a candidate for resubmission review include the date on which the Treasury Department indicated that the application was a candidate.

Practical Implications

Multiemployer plan fiduciaries that are considering suspending plan benefits should familiarize themselves with the changes.
To learn more about multiemployer plans and the impact of the MPRA, see: