The Department of the Treasury (Treasury), the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC) have formally requested comments with respect to certain provisions of the Multiemployer Pension Reform Act of 2014 (MPRA). Treasury and IRS are asking for information about the suspension of benefit provisions that were added by MPRA. The PBGC is asking for information about the partition and merger provisions of title IV of the Employee Retirement Income Security Act of 1974 (ERISA), as amended by MPRA. The requests for information (RFIs) appear in the February 18, 2015, Federal Register.

Comments Due Date: Comments should be submitted by April 6, 2015.

Background and Information Requested

Treasury/IRS Request

MPRA permits a sponsor of a multiemployer defined benefit plan that is in "critical and declining" status¹ to suspend certain benefits provided certain requirements are met and the Department of Treasury approves the application for the suspension of benefits.² The provision for suspension of benefits is set forth in section 432(e)(9) of the Internal Revenue Code (Code).³ MPRA required the Department of the Treasury to issue guidance within 180 days from the date of enactment. In order to provide the needed guidance, the Department of the Treasury and the IRS have now requested comments with respect to the implementation of the suspension of benefits provisions of MPRA. In the RFI, Treasury and IRS indicated that an application for approval of a suspension of benefits should not be submitted prior to the date specified in the forthcoming guidance.

The issues upon which Treasury and IRS requested comments include the following:

• How should actuarial and other issues relating to determinations and certifications (such as certification of insolvency) be addressed?
• Issues pertaining to providing notice to participants of the request and the impact on the individual participant.
• Issues relating to how a vote of plan participants should be conducted, including the timing involved.
• Other practical issues relating to the process.

The Treasury and IRS RFI may be found at http://www.gpo.gov/fdsys/pkg/FR-2015-02-18/pdf/2015-03290.pdf.

Cheiron Observations: The Treasury/IRS RFI poses a number of important questions that will need to be answered in the forthcoming guidance. Plan sponsors need to think carefully about how that guidance might apply to their own situation and respond accordingly. If, for example, plan sponsors do not have up-to-date addresses for participants and beneficiaries, especially terminated vested participants, issues can be raised concerning the notice and voting portions of the overall suspension process. This may be an important area for which guidance is necessary.

PBGC Request

MPRA amended sections 4231 and 4233 of title IV to add to the merger rules and replace the partition rules. Under the additional merger rules, the PBGC may facilitate a merger if certain requirements are met. Under the new partition rules, any "eligible multiemployer plan" may apply for a partition of the plan in which case, if approved, the PBGC would fund the liabilities transferred so that the original plan would remain solvent. An "eligible multiemployer plan" must satisfy five (5) requirements including being in "critical and declining" status. If there is an application for a partition, any suspension of benefits under the new MPRA rules may not take effect prior to the effective date of the partition. In the RFI, the PBGC indicated that, because regulations are required to implement the new partition provision, a plan sponsor may submit a request only on or after a date to be specified in regulations.

The issues upon which PBGC requested comments include the following:

• Issues pertaining to the application process including the information available.
• How can a plan demonstrate that it has taken all reasonable measures to avoid insolvency?
• How is the minimum amount to be transferred that would allow a plan to maintain solvency determined?
• How should the 270 days that the PBGC has to decide upon a partition request coordinate with the 225 days that the Treasury/IRS has to decide upon a suspension application?
• What practical issues are there when there is a concurrent request to the PBGC for a facilitated merger or partition, and a request to the Treasury/IRS for approval of a suspension of benefits?

The PBGC RFI may be found at http://www.gpo.gov/fdsys/pkg/FR-2015-02-18/pdf/2015-03434.pdf.

Cheiron Observations: The PBGC RFI raises a number of questions particularly concerning the interplay with the suspension of benefit provisions and the projections relating to solvency. Plan sponsors that may want to take advantage of the new provisions should think carefully about the issues and respond accordingly.

Cheiron pension consultants can assist you in responding to the RFIs.

Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Therefore, we do not provide legal services or tax advice.

¹ Sometimes referred to as "deeply troubled plans."

²See the Cheiron Pension Alert of December 11, 2014, for highlights of the overall process.

³MPRA also made parallel changes to section 305 of the Employee Retirement Income Security Act of 1974 (ERISA).