IRS approved five-year extensions for a multiemployer plan's amortization bases

Plain-English summary

A multiemployer pension plan requested automatic extensions for amortizing several unfunded liability bases. The IRS initially proposed denial because one base did not match the actuarial valuation and two bases were hypothetical. After a conference, the plan revised the application to match the valuation and remove the hypothetical items. The IRS approved a five-year extension for each listed charge base after receiving the required actuarial certification about funding deficiencies, the sponsor's funding-improvement plan, benefit-payment capacity, and notice. The ruling also cautions the plan about updating its mortality assumptions and relying on presumed approval when certifying its funding status.

Ruling snapshot

• Question: Did the revised application qualify for automatic extensions of the plan's amortization periods?
• Outcome: Approved
• Key authorities: IRC §§ 412, 431, and 432; Rev. Proc. 2010-52

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, DC. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

MAR 21 2025

Release Number: 202524014
Release Date: 6/13/2025

Re: Request for automatic extension of amortization periods

Taxpayer =
(EIN: - )
Plan =
(EIN: - ; Plan No: )
Dear

This letter constitutes notice that approval has been granted for your revised
request for an automatic extension for amortizing certain unfunded liabilities as of
May 1, 2024, 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 May 1, 2024 and applies to the eligible
amortization charge bases as identified in your revised application submission
and shown below. This approval will extend the amortization period of each
amortization charge base shown below for 5 years.

Upon review of the Plan’s original submission, dated September 11, 2024, the
Internal Revenue Service (“the Service”) discovered that three amortization
bases included in the submission, one established on May 1, 2023 and two
established on May 1, 2024, were either inconsistent with the amount shown in
the Plan's May 1, 2023 actuarial valuation report, or were hypothetical in nature.
The Service tentatively denied the Plan's application for an extension of
amortization periods on January 14, 2025. The Service also offered a conference
of right which was accepted and held with an authorized representative on
January 30, 2025. All arguments were considered, including additional
information provided on February 18, 2025.

During the conference of right, the Service offered a tentative approval if the
Taxpayer agreed to revise its application to match the actuarial loss base from

the May 1, 2023 actuarial valuation report and to remove the two hypothetical
May 1, 2024 charge bases. The Plan submitted such revisions, along with
additional supporting information, on February 18, 2025.

Amortization Base Table

The extension of the amortization periods of unfunded liabilities of the Plan is
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(d)(1)(A) of the Code, that 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:

(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 or
acceptability of any calculation or 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 to 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 that has the
effect of increasing the liabilities of those plans, would be considered an
amendment for purposes of Section 412(c)(7) of the Code and section 302(c)(7)
of ERISA.

The Service discussed the appropriateness of the Plan’s mortality assumption,
which does not adjust the base mortality tables using any generational projection
scale, with the Plan’s actuary during the conference of right. In the letter
providing the revisions received on February 18, 2025, the Plan's actuary
provided a discussion as to why they, in their professional judgement, believe the
mortality assumption used for the May 1, 2023 valuation was reasonable. The
Plan’s actuary also indicated their intent to update the Plan’s mortality
assumption for the May 1, 2024 actuarial valuation and that their updated
assumption will use a generational mortality scale to project rates to 2030.

For the May 1, 2024 PPA Status Certification for the Plan, the Plan’s actuary
relied on presumed approval of the Plan’s submission for an amortization
extension to satisfy certain criteria for emergence from Critical Status and
certified the Plan as neither endangered nor critical status for the 2024 plan year.
While this practice may be consistent with Section 3.09 of Rev. Proc. 2010-52,
such submissions are subject to review by the Service, and if such submission
for an amortization extension is ultimately denied, the Plan’s PPA Status for the

year in question may require recertification. Actuaries should exercise caution
when relying on an application for an amortization extension where it would
change the plan’s status under Section 432 of the Code.

Pursuant to a power of attorney of 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 directly 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 Mr.
(ID Badge Number jat( ) -

Sincerely yours,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2

Enclosures
Notice 437 — Notice of Intention to Disclose

Copy of the letter ruling with proposed deletions

cc:
Manager, Classification Group 4, Houston, Texas