Multiemployer plan receives an amortization extension for unfunded liabilities

Plain-English summary

A multiemployer plan requested an automatic extension of the periods for amortizing specified unfunded liabilities. Its actuary certified that without relief the plan would have a funding deficiency in the current or one of the next nine plan years, that the sponsor had adopted a funding-improvement plan, and that the plan could pay expected benefits and expenses during the extended period. The plan also represented that it had given the required notice. The IRS approved the extension under section 431(d)(1), which permits an extension of no more than five years when the statutory criteria are met. Previously extended bases remained ineligible for another extension, and one specified base had to be reamortized over its remaining years.

Ruling snapshot

• Question: May the multiemployer plan extend the amortization periods for specified unfunded-liability bases under section 431(d)?
• Outcome: approved
• Key authorities: IRC §§ 431(d) and 412(c)(7); ERISA §§ 304 and 302(c)(7); Rev. Proc. 2010-52

Full text (IRS public release)

Scanned document; transcription proofread from IRS OCR against all 3 page images. Obvious OCR misreads were corrected, blank redactions were preserved, and wording is otherwise verbatim.

Significant Index No. 0431.00-00

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

OCT 19 2017

201802019

T:EP:RA:A2

Re:                                      (“Plan”)
EIN:       -             /PN:

Taxpayer =

Dear             :

This letter constitutes notice that approval has been granted for your request for an
automatic extension for amortizing the unfunded liabilities as of January 1,       for
the above-named Plan. This approval applies to such unfunded liabilities which are
described in sections 431(b)(2)(B) and 431(b)(4) of the Internal Revenue Code
(“Code”), and sections 304(b)(2)(B) and 304(b)(4) of the Employee Retirement Income
Security Act of 1974 (“ERISA”). This extension is effective with the plan year
beginning January 1,       and applies to the eligible amortization charge bases as
identified in your application submission that are established as of January 1,       as
shown in the table below. This approval will extend the amortization periods for
       years.

                                                       Date        Outstanding
Type of Base                 Initial Amount             Established Balance as of

Assumption change
Experience loss
Assumption change
Experience loss
Experience loss
Assumption change
Experience loss


201802019

2

Bases that were initially established prior to January 1,       and previously extended
are not eligible for an additional extension under section 431(d) of the Code, and will
continue to be amortized as reported in your letter of February 27, 2017. However, the
base established January 1,       with an initial amount of $       and an
outstanding balance of $       as of January 1,       must be reamortized over
       remaining years, with an annual amortization charge of $       beginning January 1,
       .

The extension of the amortization periods of the unfunded liabilities of the Plan was
granted in accordance with section 431(d)(1) of the Code. Section 431(d)(1)(A) of the
Code requires the Secretary to extend the period of time required to amortize any
unfunded liability of a plan for a period of time (not in excess of 5 years) if the plan
submits an application meeting the criteria stated in section 431(d)(1)(B). The Plan
has submitted the required information to meet the criteria in section 431(d)(1)(B),
including a certification from the plan’s actuary that:

(i)    absent the extension under subparagraph (A), the Plan would have an
       accumulated funding deficiency in the current plan year or any of the 9
       succeeding plan years,

(ii)   the Plan Sponsor has adopted a plan to improve the Plan's funding status,

(iii)  the Plan is projected to have sufficient assets to timely pay expected benefits
       and anticipated expenditures over the amortization period as extended, and

(iv)   the notice required under paragraph (3)(A) has been provided, in accordance
       with Section 3.05 of Rev. Proc. 2010-52.

In granting this ruling, it is expected that:

(i)    the Plan's assumptions and methods will be reviewed and updated as
       appropriate so that each prescribed assumption is applied in accordance with
       applicable law and regulations,

(ii)   each other assumption is reasonable (taking into account the experience of
       the Plan and reasonable expectations) and such other assumptions, in
       combination, offer the best estimate of anticipated experience under the Plan,
       and

(iii)  the plan sponsor obtained the appropriate approvals for any changes in
       assumptions or funding methods (whether through an individual private letter
       ruling or by qualifying for automatic approvals available in the Code, Treasury
       regulations or other generally applicable guidance).

Furthermore, we are not expressing any opinion as to the accuracy of any material
submitted with your request.

Your attention is called to section 412(c)(7) of the Code and section 302(c)(7) of
ERISA which describe the consequences that would result in the event the Plan is


201802019

3

amended to increase benefits, change the rate in the accrual of benefits or to change
the rate of vesting while the amortization extension remains in place. Please note that
any amendment that increases liabilities for a profit sharing plan or any other
retirement plans (whether qualified or unqualified) maintained by the Trustees of the
Plan and covering participants of the Plan to which this ruling applies, would be
considered an amendment for purposes of section 412(c)(7) of the Code and
section 302(c)(7) of ERISA.

We have sent a copy of this letter to the Manager, EP Classification in Baltimore,
Maryland, to the Manager, EP Compliance Unit in Chicago, Illinois, and to your
authorized representative pursuant to a power of attorney on file in this office.

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of the
Internal Revenue Code provides that it may not be used or cited by others as
precedent.

If you require further assistance concerning this matter, please contact
(ID#           ) at (     )     -       .

Sincerely yours,


David M. Ziegler, Manager
Employee Plans Actuarial Group 2

cc:    Manager, EP Classification
       Baltimore, Maryland

       Manager, EP Compliance Unit
       Chicago, Illinois