IRS approves an automatic extension for pension-plan amortization periods

Plain-English summary

A multiemployer pension plan requested an automatic extension of the periods for amortizing specified unfunded liabilities. The IRS approved the request for the redacted eligible charge bases and a redacted number of years, subject to section 431(d)'s five-year maximum. The plan's actuary certified that without relief the plan would face a funding deficiency, the sponsor had adopted a funding-improvement plan, projected assets would cover benefits and expenses during the extended period, and the required notice had been given. The IRS expected the plan to keep its actuarial assumptions and methods lawful, reasonable, and current. It also warned that benefit, accrual-rate, or vesting changes while the extension remained in effect could trigger section 412(c)(7).

Ruling snapshot

• Question: Did the plan qualify for an automatic extension of the amortization periods for specified unfunded liabilities?
• Outcome: approved, for the redacted period and charge bases shown in the IRS release
• Key authorities: IRC §§ 412(c)(7) and 431(d); ERISA §§ 302(c)(7) and 304(b); Rev. Proc. 2010-52

Full text (IRS public release)

Significant Index Number 0431.00-00

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Number: 202001028

OCT 10 2019

Re: Automatic Extension of Amortization Periods

Taxpayer =

Plan =

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
Plan. This approval applies to the unfunded liabilities 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 submission, modified as of
August 12,       , as shown in the table below. This approval will extend the
amortization periods for       years.

Amortization Base Table

[Columns: Date Established | Type of Base | Original Period | Remaining Years Before
Extension 1/1/ | Outstanding Balance 1/1/ | Amortization Charge Before Extension.
All entries are redacted in the IRS release.]

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 section 431(d)(1)(A) of the Code, the Plan would
have an accumulated funding deficiency in the current plan year or any of the
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 section 431(d)(3)(A) of the Code 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 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.

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.

We have sent a copy of this letter to the Manager, EP Classification in Columbus, Ohio
and to the Manager, EP Compliance Unit in Chicago, Illinois. We have not sent a copy
of this letter to your authorized representative because the Power of Attorney (Form
2848) on file in this office does not authorize him to receive copies of notices and
communications. If you have any questions regarding this matter, please contact

                       (ID#           ) at (     )        -

Sincerely,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2

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