IRS grants a multiemployer pension plan a 5-year extension to amortize its unfunded liabilities

Plain-English summary

A multiemployer pension plan (the kind jointly sponsored for workers who move among several employers, usually under a union contract) asked the IRS for an automatic extension of the time it has to pay down its unfunded liabilities as of January 1, 2023. Under section 431(d)(1) of the Code, the IRS must grant an extension of up to 5 years when the plan's actuary certifies four things: that without the extension the plan would run an accumulated funding deficiency in the current year or the next 9 years; that the sponsor has adopted a plan to improve funding; that the plan is still projected to have enough assets to pay expected benefits over the extended period; and that the required participant notice was given. The IRS found the plan met those criteria and approved the extension, effective with the plan year beginning January 1, 2023. Each listed amortization charge base gets an extra 5 years. The practical effect is to stretch the required catch-up contributions over more years, easing near-term funding pressure. The IRS cautioned that increasing benefits or accrual or vesting rates while the extension is in place triggers consequences under section 412(c)(7).

Ruling snapshot

• Question: May the plan get an automatic 5-year extension of the periods for amortizing its unfunded liabilities as of January 1, 2023?
• Outcome: approved
• Key authorities: IRC § 431(d)(1) (and §§ 431(b)(2)(B), 431(b)(4), 431(d)(3)(A)); IRC § 412(c)(7); ERISA §§ 302, 304; Rev. Proc. 2010-52

Full text (IRS public release)

Significant Index No. 0431.00-00

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON D.C. 202[illegible]

JUL 03 2024

Release Number: 202439017
Release Date: 9/27/2024

Re: Request for automatic extension of amortization periods

Taxpayer =

(EIN: - )
Plan =

(EIN: - ; Plan No: )

Dear [redacted]

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, 2023, 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, 2023 and applies to the eligible amortization charge bases as identified in
your application submission, as shown below. This approval will extend the
amortization period of each amortization charge base shown below for 5 years.

Amortization Base Table

[Columns: Description | Date Established | Outstanding Balance as of 1/1/2023 | Requested Extension (in years). The dated and dollar-value cells are redacted or illegible in the scan; the legible description entries follow.]

Change in Assumptions
Change in Assumptions
Change in Assumptions
Plan Amendment
Experience Loss
Experience Loss
Experience Loss

Amortization Base Table (continued)

[Columns: Description | Date Established | Outstanding Balance as of 1/1/2023 | Requested Extension (in years).]

Experience Loss
Experience Loss
Change in Assumptions
Experience Loss
Experience Loss
Plan Amendment
Experience Loss
Change in Assumptions
Change in Plan
Experience Loss

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) of the Code.
The Plan has submitted the required information to meet the criteria in
section 431(d)(1)(B) of the Code, including a certification from the plan's actuary that:

(i) absent the extension under section 431(a)(1)(A) of the Code, 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 section 431(d)(3)(A) has been provided, in
accordance with section 3.05 of Rev. Proc. 2010-52.

In granting this ruling, it is expected that:

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,

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

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.

Pursuant to a power of attorney on file with this office, a copy of this letter ruling is
being sent to your authorized representative. Additionally, we have sent a copy of this
letter to the Manager, Classification Group 4 in Houston, Texas.

This letter ruling may be revoked or modified retroactively if there was a misstatement
or omission of controlling facts, the facts at the time of the transaction are materially
different from the controlling facts on which the letter ruling was based, or the
transaction involves a continuing action or series of actions, and the controlling facts
change during the course of the transaction.

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

If you require further assistance concerning this matter, please contact [illegible]
(ID# [illegible]).

Sincerely yours,
David M. Ziegler, Manager
Employee Plans Actuarial Group 2

Enclosures
Notice 437, Notice of Intention to Disclose (Rulings)
A deleted copy of the ruling

cc.