Suspension of Benefits Under the Multiemployer Pension Reform Act of 2014, 35207-35220 [2015-14945]

Download as PDF Federal Register / Vol. 80, No. 118 / Friday, June 19, 2015 / Rules and Regulations regulatory areas 2C and 3A during one charter vessel fishing trip. (v) Be a charter vessel guide or a charter vessel operator during a charter vessel fishing trip in Commission regulatory area 2C or 3A with one or more charter vessel anglers that are catching and retaining halibut without having on board the vessel with the charter vessel anglers a State of Alaska Department of Fish and Game Saltwater Charter Logbook in which the charter vessel guide has specified the following: (1) The person named on the charter halibut permit or permits being used during that charter vessel fishing trip; (2) The charter halibut permit or permits number(s) being used during that charter vessel fishing trip; and (3) The name and State-issued vessel registration (AK number) or U.S. Coast Guard documentation number of the charter vessel. 7. In § 300.67, revise paragraphs (a)(1) and (3) to read as follows: ■ § 300.67 Charter halibut limited access program. rmajette on DSK2TPTVN1PROD with RULES * * * * * (a) * * * (1) In addition to other applicable permit, licensing, or registration requirements, any charter vessel guide of a charter vessel during a charter vessel fishing trip with one or more charter vessel anglers catching and retaining Pacific halibut on board must have on board the vessel an original valid charter halibut permit or permits endorsed for the regulatory area in which the charter vessel is operating and endorsed for at least the number of charter vessel anglers who are catching and retaining Pacific halibut. Each charter halibut permit holder must ensure that the charter vessel operator and charter vessel guide of the charter vessel comply with all requirements of §§ 300.65, 300.66, and 300.67. * * * * * (3) Charter vessel angler endorsement. A charter halibut permit is valid for up to the maximum number of charter vessel anglers on a single charter vessel for which the charter halibut permit is endorsed. * * * * * SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 200, 230, 232, 239, 240, 249 and 260 [Release Nos. 33–9741B; 34–74578B; 39– 2501B; File No. S7–11–13] RIN 3235–AL39 Amendments for Small and Additional Issues Exemptions Under the Securities Act (Regulation A) Securities and Exchange Commission. ACTION: Final rule; correction. AGENCY: This document corrects the designation of a paragraph in Item 6 of Part I to Form 1–A in a final rule published in the Federal Register of April 20, 2015, regarding the Amendments for Small and Additional Issues Exemptions under the Securities Act (Regulation A). DATES: This correction is effective June 19, 2015. FOR FURTHER INFORMATION CONTACT: Linda Cullen, Office of the Secretary at (202) 551–5400. SUPPLEMENTARY INFORMATION: In FR Document No. 2015–07305 beginning on page 21806 for Monday, April 20, 2015, the following correction is made: SUMMARY: Form 1–A [Corrected] On page 21906, in the first column, third line, paragraph (e) of Form 1–A is redesignated as paragraph (d). Dated: June 16, 2015. Brent J. Fields, Secretary. [FR Doc. 2015–15146 Filed 6–18–15; 8:45 am] BILLING CODE 8011–01–P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1 and 602 [TD 9723] RIN 1545–BM73 Suspension of Benefits Under the Multiemployer Pension Reform Act of 2014 [FR Doc. 2015–15085 Filed 6–18–15; 8:45 am] BILLING CODE 3510–22–P SUMMARY: 15:11 Jun 18, 2015 AGENCY: This document contains temporary regulations relating to multiemployer pension plans that are projected to have insufficient funds, at some point in the future, to pay the full Jkt 235001 PO 00000 Frm 00031 Fmt 4700 benefits to which individuals will be entitled under the plans (referred to as plans in ‘‘critical and declining status’’). The Multiemployer Pension Reform Act of 2014 (‘‘MPRA’’) amended the Internal Revenue Code to incorporate suspension of benefits provisions that permit these multiemployer plans to reduce pension benefits payable to participants and beneficiaries if certain conditions are satisfied. MPRA requires the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor, to approve or deny applications by these plans to reduce benefits. As required by MPRA, these temporary regulations, together with proposed regulations being published at the same time, provide guidance implementing these statutory provisions. These temporary regulations affect active, retired, and deferred vested participants and beneficiaries of multiemployer plans that are in critical and declining status as well as employers contributing to, and sponsors and administrators of, those plans. The text of these temporary regulations also serves, in part, as the text of the proposed regulations (REG–102648–15) set forth in the notice of proposed rulemaking on this subject in the Proposed Rules section of this issue of the Federal Register. DATES: Effective Date: These regulations are effective on June 19, 2015. Applicability Date: For date of applicability, see § 1.432(e)(9)–1T(j). FOR FURTHER INFORMATION CONTACT: The Department of the Treasury MPRA guidance information line at (202) 622– 1559 (not a toll-free number). SUPPLEMENTARY INFORMATION: Paperwork Reduction Act Internal Revenue Service (IRS), Treasury. ACTION: Temporary regulations. VerDate Sep<11>2014 35207 Sfmt 4700 These temporary regulations are being issued without prior notice and public procedure pursuant to the Administrative Procedure Act (5 U.S.C. 553). For this reason, the collection of information contained in these regulations has been reviewed and, pending receipt and evaluation of public comments, approved by the Office of Management and Budget under control number 1545–2260. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number. For further information concerning this collection of information, and where to submit comments on the collection of information and the accuracy of the estimated burden, and suggestions for reducing this burden, E:\FR\FM\19JNR1.SGM 19JNR1 35208 Federal Register / Vol. 80, No. 118 / Friday, June 19, 2015 / Rules and Regulations please refer to the preamble to the crossreferenced notice of proposed rulemaking on this subject in the Proposed Rules section in this issue of the Federal Register. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103. Background rmajette on DSK2TPTVN1PROD with RULES Overview Section 432(e)(9) 1 of the Internal Revenue Code (Code) permits the plan sponsor of a multiemployer plan that is projected to have insufficient funds, at some point in the future, to pay the full benefits to which individuals will be entitled under the plan (referred to as a plan in ‘‘critical and declining status’’) to reduce the pension benefits payable to participants and beneficiaries under the plan if certain conditions are satisfied (referred to as a ‘‘suspension of benefits’’). MPRA requires the Secretary of the Treasury, in consultation with the Pension Benefit Guaranty Corporation and the Secretary of Labor (generally referred to in this preamble as the Treasury Department, PBGC, and Labor Department, respectively), to issue appropriate guidance to implement the provisions of section 432(e)(9). This document contains temporary regulations under section 432(e)(9) that, together with proposed regulations that are being published elsewhere in this issue of the Federal Register and a revenue procedure being published in the Internal Revenue Bulletin, Rev. Proc. 2015–34, implement section 432(e)(9) as required by the statute. The Treasury Department consulted with the PBGC and the Labor Department on these temporary regulations. The temporary regulations in this document, which are applicable immediately, provide sufficient guidance to enable a plan sponsor that wishes to apply for approval of a suspension of benefits to prepare and submit such an application, and to enable the Department of the Treasury to begin the processing of such an application. The temporary regulations provide general guidance regarding section 432(e)(9), including guidance 1 Section 432(e)(9) was added to the Internal Revenue Code by the Pension Protection Act of 2006, Public Law 109–280 (120 Stat. 780 (2006)) (PPA ’06) and amended by the Multiemployer Pension Reform Act of 2014, Division O of the Consolidated and Further Continuing Appropriations Act, 2015, Public Law 113–235 (128 Stat. 2130 (2014)) (MPRA). VerDate Sep<11>2014 15:11 Jun 18, 2015 Jkt 235001 regarding the meaning of the term ‘‘suspension of benefits,’’ the general conditions for a suspension of benefits, and the implementation of a suspension after a participant vote. The notice of proposed rulemaking, published elsewhere in this issue of the Federal Register, includes the proposed regulations and requests comments on the provisions of the proposed regulations as well as these temporary regulations. The provisions of the temporary regulations and proposed regulations are expected to be integrated and issued as a single set of final regulations with any changes that are made following consideration of the comments. The proposed regulations, which are not applicable immediately, contain additional provisions with respect to which the Department of the Treasury intends to consider public comments before finalizing a decision to approve an application for suspension of benefits. The proposed regulations also provide additional guidance regarding section 432(e)(9), including guidance relating to the standards that will be applied in reviewing an application for suspension of benefits and the statutory limitations on a suspension of benefits. The regulations implementing the statutory suspension of benefits provisions have been divided, as described, into temporary regulations and proposed regulations in order to balance the interest in considering public comments on rules before they apply with the evident statutory intent, reflected in MPRA, to implement the statutory provisions without undue delay. Although the Department of the Treasury is issuing proposed and temporary regulations under section 432(e)(9), it is expected that no application proposing a benefit suspension will be approved prior to the issuance of final regulations. If a plan sponsor chooses to submit an application for approval of a proposed benefit suspension in accordance with the proposed and temporary regulations before the issuance of final regulations, then the plan sponsor may need to revise the proposed suspension (and potentially the related notices to plan participants) or supplement the application to take into account any differences in the requirements relating to suspensions of benefits that might be included in the final regulations. Rev. Proc. 2015–34 prescribes the specifics of the application process for approval of a proposed benefit suspension. The revenue procedure also provides a model notice that a plan sponsor proposing a benefit suspension PO 00000 Frm 00032 Fmt 4700 Sfmt 4700 may use to satisfy the statutory notice requirement. Statutory Background Code section 412 contains minimum funding rules that generally apply to pension plans. Code section 431, added by section 211 of PPA ’06, sets forth the funding rules that apply specifically to multiemployer defined benefit plans. Code section 432, added by section 212 of PPA ’06, sets forth additional rules that apply to certain multiemployer plans in endangered or critical status, and permits plans in critical status to be amended to reduce certain otherwise protected benefits (referred to as adjustable benefits). Section 202 of PPA ’06 amended section 305 of the Employee Retirement Income Security Act of 1974, Public Law 93–406 (88 Stat. 829 (1974)), as amended (ERISA), to prescribe parallel rules. PPA ’06 provided that Code section 432 and ERISA section 305 would sunset for plan years beginning after December 31, 2014. However, section 101 of MPRA made them permanent, with certain modifications. Section 201 of MPRA amended Code section 432 to add a new status, called critical and declining status, for multiemployer defined benefit plans. Section 432(b)(6) provides that a plan in critical status is treated as being in critical and declining status if the plan satisfies the criteria for critical status and in addition is projected to become insolvent within the meaning of section 418E during the current plan year or any of the 14 succeeding plan years (or 19 succeeding plan years if the plan has a ratio of inactive participants to active participants that exceeds two to one or if the funded percentage of the plan is less than 80 percent). Section 201 of MPRA also amended Code section 432(e)(9) to prescribe benefit suspension rules for plans in critical and declining status.2 MPRA was enacted on December 16, 2014. Section 201(b)(7) of MPRA provides that, not later than 180 days after the date of enactment, the Treasury Department, in consultation with the PBGC and the Labor Department, is required to publish appropriate guidance to implement section 432(e)(9). Section 201(c) of MPRA provides that the amendments made by section 201 will take effect on the date of enactment. 2 Section 201 of MPRA makes parallel amendments to section 305 of ERISA and the Department of the Treasury has interpretive jurisdiction over the subject matter of these provisions under ERISA as well as the Code. See also section 101 of Reorganization Plan No. 4 of 1978 (43 FR 47713). E:\FR\FM\19JNR1.SGM 19JNR1 Federal Register / Vol. 80, No. 118 / Friday, June 19, 2015 / Rules and Regulations On February 18, 2015, the Department of the Treasury issued a Request for Information on Suspensions of Benefits under the Multiemployer Pension Reform Act of 2014 in the Federal Register (80 FR 8578). The Request for Information included questions focusing on certain matters to be addressed in guidance implementing section 432(e)(9) and indicated that multiemployer plans should not submit applications for suspensions of benefits prior to a date specified in such future guidance. These temporary regulations, and the proposed regulations published elsewhere in this issue of the Federal Register, reflect consideration of comments received in response to the Request for Information. Definition of Suspension of Benefits and General Rules Under Section 432(e)(9)(A) and 432(e)(9)(B)(i) Through (iv) Section 201 of MPRA prescribes benefit suspension rules for multiemployer defined benefit plans in critical and declining status. Section 432(e)(9)(A) provides that notwithstanding section 411(d)(6) and subject to section 432(e)(9)(B) through (I), the plan sponsor of a plan in critical and declining status may, by plan amendment, suspend benefits that the sponsor deems appropriate. The statute defines suspension of benefits as the temporary or permanent reduction of any current or future payment obligation of the plan to any participant or beneficiary under the plan, whether or not in pay status at the time of the suspension of benefits. Any suspension will remain in effect until the earlier of when the plan sponsor provides benefit improvements in accordance with section 432(e)(9)(E) or when the suspension expires by its own terms. Thus, if a suspension does not expire by its own terms, it continues indefinitely. Under the statute, a plan will not be liable for any benefit payments not made as a result of a suspension of benefits. All references to suspensions of benefits, increases in benefits, or resumptions of suspended benefits with respect to participants will also apply with respect to benefits of beneficiaries or alternative payees 3 of participants. See section 432(e)(9)(B)(iv). rmajette on DSK2TPTVN1PROD with RULES Retiree Representative In the case of a plan with 10,000 or more participants, section 432(e)(9)(B)(v) requires the plan sponsor 3 The Department of the Treasury and the IRS understand this provision to refer to alternate payees. VerDate Sep<11>2014 15:11 Jun 18, 2015 Jkt 235001 to select a plan participant in pay status to act as a retiree representative. The retiree representative is required to advocate for the interests of the retired and deferred vested participants and beneficiaries of the plan throughout the suspension approval process. The plan must provide for the retiree representative’s reasonable expenses, including reasonable legal and actuarial support, commensurate with the plan’s size and funded status. Conditions for Suspensions Section 432(e)(9)(C) sets forth conditions that must be satisfied before a plan sponsor of a plan in critical and declining status for a plan year may suspend benefits. Under one of the conditions, the plan actuary must certify, taking into account the proposed suspension of benefits (and, if applicable, a proposed partition of the plan under section 4233 of ERISA (partition)), that the plan is projected to avoid insolvency within the meaning of section 418E, assuming the suspension of benefits continues until it expires by its own terms or if no such expiration date is set, indefinitely. Another condition requires a plan sponsor to determine, in a written record to be maintained throughout the period of the benefit suspension, that although all reasonable measures to avoid insolvency have been taken (and continue to be taken during the period of the benefit suspension), the plan is still projected to become insolvent unless benefits are suspended. In making this determination, the plan sponsor may take into account factors including a specified list of 10 statutory factors.4 See section 432(e)(9)(C)(ii). Limitations on Suspensions Section 432(e)(9)(D) contains limitations on the benefits that may be suspended, some of which apply to plan participants and beneficiaries on an individual basis and some of which apply on an aggregate basis. Under the statute, an individual’s monthly benefit may not be reduced below 110 percent 4 These 10 factors are current and past contribution levels; levels of benefit accruals (including prior reductions in the rate of benefit accruals); prior adjustable benefit reductions and suspensions of benefits; the impact on plan solvency of the subsidies and ancillary benefits available to active participants; compensation levels of active participants relative to employees in the participants’ industry generally; competitive and other economic factors facing contributing employers; the impact of benefit and contribution levels on retaining active participants and bargaining groups under the plan; the impact of past and anticipated contribution increases under the plan on employer attrition and retention levels; and measures undertaken by the plan sponsor to retain or attract contributing employers. PO 00000 Frm 00033 Fmt 4700 Sfmt 4700 35209 of the monthly benefit that is guaranteed by the PBGC under section 4022A of ERISA on the date of the suspension. In addition, no benefits based on disability (as defined under the plan) may be suspended. In the case of a participant or beneficiary who has attained age 75 as of the effective date of a suspension, section 432(e)(9)(D)(ii) provides that the suspension may not exceed the applicable percentage of the individual’s maximum suspendable benefit (the age-based limitation). The maximum suspendable benefit is the maximum amount of an individual’s benefit that would be suspended without regard to the age-based limitation. The applicable percentage is a percentage that is calculated by dividing (i) the number of months during the period that begins with the month after the month in which the suspension is effective and ends with the month in which that participant or beneficiary attains the age of 80 by (ii) 60 months. Section 432(e)(9)(D) also requires the aggregate benefit suspensions (considered, if applicable, in connection with a partition) to be reasonably estimated to achieve, but not materially exceed, the level that is needed to avoid insolvency. Under the statute, any suspension of benefits must be equitably distributed across the participant and beneficiary population, taking into account factors that may include one or more of a list of 11 statutory factors.5 Finally, with regard to a suspension of benefits that is made in combination with a partition, section 432(e)(9)(D)(v) provides that the suspension may not occur before the effective date of the partition. Benefit Improvements Section 432(e)(9)(E) sets forth rules relating to benefit improvements made while a suspension of benefits is in effect. Under this provision, a benefit improvement is defined as a resumption of suspended benefits, an increase in benefits, an increase in the rate at which benefits accrue, or an increase in the rate at which benefits become nonforfeitable under the plan. 5 These 11 factors are age and life expectancy; length of time in pay status; amount of benefit; type of benefit; extent of a subsidized benefit; extent of post-retirement benefit increases; history of benefit increases and reductions; years to retirement for active employees; any discrepancies between active and retiree benefits; extent to which participants are reasonably likely to withdraw support for the plan, resulting in accelerated employer withdrawal; and the extent to which the benefits are attributed to service with an employer that failed to pay its withdrawal liability. E:\FR\FM\19JNR1.SGM 19JNR1 35210 Federal Register / Vol. 80, No. 118 / Friday, June 19, 2015 / Rules and Regulations The statute also provides that, while a suspension of benefits is in effect, a plan sponsor generally has discretion to provide benefit improvements. However, a sponsor may not increase plan liabilities by reason of any benefit improvement for any participant or beneficiary who is not in pay status (in other words, those who are not yet receiving benefits, such as active employees or deferred vested employees) unless (1) this benefit improvement is accompanied by an equitable distribution of benefit improvements for those who have begun to receive benefits (typically, retirees), and (2) the plan actuary certifies that, after taking those benefit improvements into account, the plan is projected to avoid insolvency indefinitely.6 Whether an individual is in pay status for this purpose is generally based on whether the individual’s benefits began before the first day of the plan year for which the benefit improvement took effect. rmajette on DSK2TPTVN1PROD with RULES Notice of Proposed Suspension A plan sponsor may not suspend benefits unless notice is provided in accordance with section 432(e)(9)(F). Under this section, concurrently with an application to suspend benefits under section 432(e)(9)(G), the plan sponsor must give notice to plan participants and beneficiaries who may be contacted by reasonable efforts, each employer that has an obligation to contribute (within the meaning of section 4212(a) of ERISA) under the plan, and each employee organization that represents plan participants employed by those employers for purposes of collective bargaining. The notice must contain sufficient information to enable individuals to understand the effect of any suspension of benefits, including an individualized estimate, on an annual or monthly basis, of the effect on each participant or beneficiary. The notice must also contain certain other specified information.7 Notice must be provided 6 Avoidance of insolvency is determined by reference to section 418E under which a plan is insolvent if it is unable to pay scheduled benefits for a year. Pursuant to section 432(e)(9)(E)(iv), this restriction does not apply to certain benefit improvements if the Treasury Department determines either that the benefit improvements are reasonable and provide for only de minimis increases in plan liabilities or that the benefit improvements are required as a condition of qualification or to comply with other applicable law. 7 The specified information includes a description of the factors considered by the plan sponsor in designing the benefit suspension; a statement that the application for suspension of benefits will be available on the Web site of the Department of the Treasury and that comments on the application will be accepted; information on the rights and remedies of plan participants and beneficiaries; if applicable, a statement about the VerDate Sep<11>2014 15:11 Jun 18, 2015 Jkt 235001 in a form and manner prescribed in agency guidance, written in a manner so as to be understood by the average plan participant, and provided in written, electronic, or other appropriate form to the extent it is reasonably accessible to those to whom notice must be furnished. Any notice provided under section 432(e)(9)(F)(i) will satisfy the requirement for notice of a significant reduction in benefits described in section 4980F. See section 432(e)(9)(F)(iv). Suspension Applications Section 432(e)(9)(G) describes the process for approval or rejection of a plan sponsor’s application for a suspension of benefits. Under the statute, the Treasury Department, in consultation with the PBGC and the Labor Department, must approve an application upon finding that the plan is eligible for the suspensions and has satisfied the criteria of sections 432(e)(9)(C), (D), (E), and (F) (each described earlier). In evaluating whether a plan sponsor has met the criteria in section 432(e)(9)(C)(ii) (a plan sponsor’s determination that, although all reasonable measures have been taken, the plan will become insolvent if benefits are not suspended), the plan sponsor’s consideration of factors under that clause must be reviewed. The statute also requires that the plan sponsor’s determinations in an application for a suspension of benefits be accepted unless they are clearly erroneous. Section 432(e)(9)(G) also requires an application for a suspension of benefits to be published on the Web site of the Department of the Treasury and requires the Treasury Department to publish a Federal Register notice within 30 days of receiving a suspension application, soliciting comments from contributing employers, employee organizations, and participants and beneficiaries of the plan for which a suspension application was made, as well as other interested parties. Within 225 days after an application for a suspension of benefits is submitted, the statute requires the Treasury Department, in consultation with the PBGC and the Labor Department, to approve or deny the application. If the plan sponsor is not appointment of a retiree representative, the date of appointment of the retiree representative, identifying information about the retiree representative (including whether the representative is a plan trustee) and how to contact the representative; and information on how to contact the Department of the Treasury for more information and assistance where appropriate. PO 00000 Frm 00034 Fmt 4700 Sfmt 4700 notified that it has failed to satisfy one or more applicable criteria within that 225-day period, the application is deemed approved. If the application is denied, a notice to the plan sponsor must detail the specific reasons for the rejection, including reference to the specific requirement not satisfied. Approval or denial of an application is treated as final agency action for purposes of 5 U.S.C. 704 (that is, the approval or denial is treated as final agency action for purposes of the Administrative Procedure Act, Public Law 79–404, 60 Stat. 237, as amended (APA)). Participant Vote on Proposed Benefit Reduction If a suspension application is approved, it then goes to a vote of plan participants and beneficiaries. See section 432(e)(9)(H). The vote will be administered by the Treasury Department, in consultation with the PBGC and the Labor Department, within 30 days after approval of the suspension application. The plan sponsor is required to provide a ballot for a vote (subject to approval by the Treasury Department, in consultation with the PBGC and the Labor Department). The statute specifies information that the ballot must include.8 If a majority of plan participants and beneficiaries do not vote to reject the suspension, the statute requires the Treasury Department to issue a final authorization to suspend benefits within seven days after the vote. If a majority of plan participants and beneficiaries vote to reject the suspension, the statute requires the Treasury Department, in consultation with the PBGC and the Labor Department, to determine whether the plan is a systemically important plan. A systemically important plan is a plan for which the PBGC projects the present value of projected financial assistance payments to exceed $1.0 billion, as indexed, if suspensions are not implemented. If a majority of plan participants and beneficiaries vote to reject the 8 This information includes a statement from the plan sponsor in support of the suspension; a statement in opposition to the suspension compiled from comments received in response to the Federal Register notice issued by Treasury within 30 days of receiving the suspension application; a statement that the suspension has been approved by the Secretary of the Treasury, in consultation with the PBGC and the Secretary of Labor; a statement that the plan sponsor has determined that the plan will become insolvent unless the suspension takes effect; a statement that insolvency of the plan could result in benefits lower than benefits paid under the suspension; and a statement that insolvency of the PBGC would result in benefits lower than benefits otherwise paid in the case of plan insolvency. E:\FR\FM\19JNR1.SGM 19JNR1 Federal Register / Vol. 80, No. 118 / Friday, June 19, 2015 / Rules and Regulations rmajette on DSK2TPTVN1PROD with RULES suspension and the plan is not a systemically important plan, a final authorization to suspend benefits will not be issued. In such a case, the statute provides that the plan sponsor may submit a new application for approval of a suspension of benefits to the Treasury Department. Within 30 days after a plan is determined to be a systemically important plan, the Participant and Plan Sponsor Advocate selected under ERISA may submit recommendations to the Treasury Department with respect to the suspension that was rejected by the vote or recommendations for any revisions to that suspension. Notwithstanding the vote rejecting the suspension, the statute requires the Treasury Department, in consultation with the PBGC and the Labor Department, to permit the plan sponsor to implement either the proposed benefit suspension or a modification by the Treasury Department, in consultation with the PBGC and the Labor Department, of that suspension. The Treasury Department must complete this requirement within 90 days after the results of a vote rejecting a suspension for a systemically important plan are certified, and a modification of the suspension by the Treasury Department is only permitted if the plan is still projected to avoid insolvency under the modification. If the Treasury Department is required to permit the suspension or a modified suspension to go into effect in the case of a systemically important plan with respect to which there has been a vote rejecting the suspension, the statute requires the Treasury Department to issue the final authorization to suspend at a time sufficient to allow the suspension to be implemented by the end of the 90-day period following certification of the results of that vote. Judicial Review Section 432(e)(9)(I)(i) allows a plan sponsor to challenge a denial of an application for suspension only after the application is denied. Under the statute, an action challenging the approval of a suspension may be brought only following the issuance of a final authorization to suspend. The statute also provides that a court will review an action challenging approval of a suspension of benefits in accordance with 5 U.S.C. 706 (that is, the standard of review applicable for purposes of the APA) and will not grant a temporary injunction with respect to a suspension unless it finds a clear and convincing likelihood that the plaintiff will prevail on the merits. Under section 432(e)(9)(I)(iii), participants and beneficiaries affected by a suspension VerDate Sep<11>2014 15:11 Jun 18, 2015 Jkt 235001 ‘‘shall not have a cause of action under this title.’’ An action challenging either the approval of a suspension of benefits or the denial of an application for a suspension of benefits may not be brought more than one year after the earliest date on which the plaintiff acquired or should have acquired actual knowledge of the existence of the cause of action. See section 432(e)(9)(I)(iv). Explanation of Provisions I. Overview These temporary regulations provide guidance on certain requirements under section 432(e)(9) regarding suspension of benefits for multiemployer defined benefit plans in critical and declining status. The temporary regulations do not address certain other requirements that are addressed in the text of the proposed regulations (REG–102648–15) set forth in the notice of proposed rulemaking on this subject in the Proposed Rules section of this issue of the Federal Register. The provisions of these temporary regulations are cross referenced in the proposed regulations so that comments on these provisions may be included with comments on the proposed regulations. In addition to the proposed and temporary regulations, the procedural requirements for submitting an application to suspend benefits, as well as a model notice, are set forth in Rev. Proc. 2015–34. II. General Rules on Suspension of Benefits These temporary regulations provide that, subject to section 432(e)(9)(B) through (I), the plan sponsor of a multiemployer plan that is in critical and declining status within the meaning of section 432(b)(6) for a plan year may, by plan amendment, implement a suspension of benefits that the plan sponsor deems appropriate. Such a suspension is permitted notwithstanding the generally applicable anti-cutback provisions of section 411(d)(6). The plan amendment implementing a suspension of benefits must be adopted in a plan year in which the plan is in critical and declining status. Under the regulations, once a plan is amended to suspend benefits, a plan may pay or continue to pay a reduced level of benefits pursuant to a suspension only if the terms of the plan are consistent with the requirements of section 432(e)(9) and the regulations. III. Definitions The temporary regulations include definitions for the terms pay status and plan sponsor. A person is in pay status under a multiemployer plan if, as PO 00000 Frm 00035 Fmt 4700 Sfmt 4700 35211 described in section 432(j)(6), at any time during the current plan year, the person is a participant, beneficiary, or alternate payee under the plan and is paid an early, late, normal, or disability retirement benefit under the plan (or a death benefit under the plan related to a retirement benefit). The term plan sponsor means the association, committee, joint board of trustees, or other similar group of representatives of the parties that establishes or maintains the multiemployer plan. However, in the case of a plan described in section 404(c), or a continuation of such a plan, the term plan sponsor means the association of employers that is the employer settlor of the plan. IV. Definition of Suspension of Benefits and Related Rules The temporary regulations provide that the term suspension of benefits means the temporary or permanent reduction, pursuant to the terms of the plan, of any current or future payment obligation of the plan with respect to any participant under the plan. A suspension of benefits can apply with respect to a participant of the plan regardless of whether the participant, beneficiary, or alternate payee has commenced receiving benefits before the effective date of the suspension of benefits. If a plan pays a reduced level of benefits pursuant to a suspension of benefits that complies with the requirements of section 432(e)(9), then the plan is not liable for any benefits not paid as a result of the suspension. A suspension of benefits may be of indefinite duration or may expire as of a certain date. Under the regulations, if the suspension of benefits has an expiration date, that date must be specified in the plan amendment implementing the suspension. The temporary regulations provide that a plan sponsor may amend the plan to eliminate some or all of a suspension of benefits, provided that the amendment satisfies the requirements that apply to benefit improvements in the proposed rules under section 432(e)(9)(E). The temporary regulations clarify that, except as otherwise specified, all references to suspensions of benefits, increases in benefits, or resumptions of suspended benefits with respect to participants also apply with respect to benefits of beneficiaries or alternate payees (as defined in section 414(p)(8)) of participants. V. Retiree Representative A retiree representative must be selected for a plan with 10,000 or more E:\FR\FM\19JNR1.SGM 19JNR1 rmajette on DSK2TPTVN1PROD with RULES 35212 Federal Register / Vol. 80, No. 118 / Friday, June 19, 2015 / Rules and Regulations participants. The temporary regulations implement this condition by requiring that a retiree representative be selected if 10,000 or more participants were reported on the most recently filed Form 5500, ‘‘Annual Return/Report of Employee Benefit Plan.’’ 9 The plan sponsor must select the retiree representative at least 60 days before the plan sponsor submits an application to suspend benefits. The retiree representative must be a plan participant who is in pay status and may or may not be a plan trustee. The role of the retiree representative is to advocate for the interests of the retired and deferred vested participants and beneficiaries of the plan throughout the suspension approval process. However, in the discretion of the plan sponsor, the retiree representative may continue in this role throughout the period of the benefit suspension. This would enable the retiree representative to monitor compliance with the ongoing requirements during the period of the suspension, such as the requirement that the plan sponsor make annual determinations that all reasonable measures to avoid insolvency have been taken and that a suspension is necessary to avoid insolvency as well as to monitor compliance with the rules relating to benefit improvements. The regulations refer to section 432(e)(9)(B)(v)(III) for rules relating to the fiduciary status of a retiree representative, but do not provide additional guidance with respect to this provision. The plan must pay reasonable expenses incurred by the retiree representative, including reasonable legal and actuarial support, commensurate with the plan’s size and funded status. Upon request, the plan sponsor must promptly provide the retiree representative with relevant information, such as plan documents and data, that is reasonably necessary to enable the retiree representative to perform the representative’s role, described earlier under this paragraph V. The temporary regulations permit a plan sponsor of a plan that has reported fewer than 10,000 participants to select a retiree representative in connection with an application for approval of a suspension of benefits in order to encourage such a plan sponsor to do so. If a retiree representative is selected for such a plan, the rules that apply to retiree representatives for plans with 10,000 or more participants (other than 9 On the Form 5500 for the 2014 plan year, this is the total number of participants as of the end of the plan year that is reported on Part II, Line 6f. VerDate Sep<11>2014 15:11 Jun 18, 2015 Jkt 235001 the rule concerning the size of the plan and the timing of the appointment) will apply. VI. Conditions for Suspensions A plan sponsor of a plan in critical and declining status 10 may suspend benefits only if the actuarial certification requirement in section 432(e)(9)(C)(i) and the plan-sponsor determinations requirements in section 432(e)(9)(C)(ii) are satisfied. A. Actuarial Certification Under the temporary regulations, the actuarial certification requirement in section 432(e)(9)(C)(i) is satisfied if, taking into account the proposed suspension of benefits (and, if applicable, a proposed partition of the plan), the plan’s actuary certifies that the plan is projected to avoid insolvency within the meaning of section 418E, assuming the suspension of benefits continues until it expires by its own terms or if no such expiration date is set, indefinitely. The temporary regulations do not provide guidance on this topic. However, the proposed regulations provide rules for the comparable requirement that the suspension (in combination with a partition, if applicable) be reasonably estimated to avoid insolvency under section 432(e)(9)(D)(iv). B. Plan-Sponsor Determinations A plan may not suspend benefits unless the plan sponsor makes initial and annual determinations that the plan is projected to become insolvent unless benefits are suspended, although all reasonable measures to avoid insolvency have been taken and continue to be taken. Under the temporary regulations, a plan satisfies the initial-plan-sponsor determinations requirement only if the plan sponsor determines that (1) all reasonable measures to avoid insolvency, within the meaning of section 418E, have been taken, and (2) the plan is projected to become insolvent within the meaning of section 418E unless the proposed suspension of benefits (or another suspension of benefits under section 432(e)(9)) is implemented for the plan. In making its determination that all reasonable measures to avoid insolvency have been taken, the plan 10 In making the projections related to whether a plan is in critical and declining status, the plan actuary’s projections are required to be based on reasonable actuarial assumptions. Rev. Proc. 2015– 34 requires disclosure of a 10-year history of certain critical assumptions for this purpose as well as for purposes of the conditions for suspensions required by section 432(e)(9)(C). PO 00000 Frm 00036 Fmt 4700 Sfmt 4700 sponsor may take into account the nonexclusive list of factors set forth in section 432(e)(9)(C)(ii). In making the initial determination that the plan is projected to become insolvent without the proposed suspension of benefits (or another suspension under section 432(e)(9)), a plan sponsor may rely on the actuarial certification made pursuant to section 432(b)(3)(A)(i) that the plan is in critical and declining status for the plan year. The rules relating to the annual-plansponsor determinations are included in the proposed regulations. VII. Limitations on Suspensions The proposed and temporary regulations reflect the individual and aggregate limitations on a suspension of benefits under section 432(e)(9)(D).11 The temporary regulations provide that after applying the individual limitations, the overall size and distribution of the suspension is subject to the aggregate limitations. The temporary regulations provide that the monthly benefit payable to a participant, beneficiary, or alternate payee may not be reduced below 110 percent of the monthly benefit that would be guaranteed by the PBGC under section 4022A of ERISA if the plan were to become insolvent as of the effective date of the suspension. The proposed regulations provide more detailed rules for applying this limitation. The temporary regulations reflect the statutory prohibition in section 432(e)(9)(D)(iii) on applying a suspension of benefits to benefits based on disability (as defined under the plan). The proposed regulations include more detailed rules for applying this limitation. The rules regarding the age-based limitation of section 432(e)(9)(D)(ii) and the aggregate limitations of section 432(e)(9)(D)(iv) and (vi) are set forth in the proposed regulations. In any case in which a suspension of benefits with respect to a plan is made in combination with a partition of the plan, the suspension of benefits may not take effect prior to the effective date of the partition. This requirement will not be satisfied if the partition order under section 4233 of ERISA has not been provided to the Treasury Department by the last day of the 225-day review period described in section 432(e)(9)(G)(iii), after which deemed approval of the suspension would occur. 11 The temporary regulations refer to section 432(e)(9)(D)(vii) for additional rules applicable to certain plans, but do not provide additional guidance with respect to this provision. E:\FR\FM\19JNR1.SGM 19JNR1 Federal Register / Vol. 80, No. 118 / Friday, June 19, 2015 / Rules and Regulations VIII. Benefit Improvements The rules regarding restrictions on benefit improvements are set forth in the proposed regulations. rmajette on DSK2TPTVN1PROD with RULES IX. Notice of Proposed Suspension The temporary regulations prescribe rules implementing the statutory notice requirements in section 432(e)(9)(F). Specifically, the temporary regulations require the plan sponsor to provide notice of a proposed suspension to all plan participants, beneficiaries of deceased participants, and alternate payees (regardless of whether their benefits are proposed to be suspended) except those who cannot be contacted by reasonable efforts; each employer that has an obligation to contribute (within the meaning of section 4212(a) of ERISA) under the plan; and each employee organization which, for purposes of collective bargaining, represents plan participants employed by such an employer. The temporary regulations provide two examples illustrating what efforts constitute reasonable efforts to contact individuals for purposes of this notice requirement. These examples indicate that it is not sufficient to merely send notices to the individuals’ last known mailing addresses and illustrate additional steps that may be used to satisfy these requirements if the plan sponsor becomes aware that some individuals did not receive notice. The temporary regulations require the notice to contain the following in order to satisfy the requirement that the notice contain sufficient information to enable plan participants and beneficiaries to understand the effect of the suspension of benefits: • An individualized estimate, on an annual or monthly basis, of the effect of the suspension on the participant or beneficiary. However, if it is not possible to provide an individualized estimate on an annual or monthly basis of the quantitative effect of the suspension on the participant or beneficiary, such as in the case of a suspension that affects the payment of any future cost-of-living adjustment, a narrative description of the effect of the suspension; • A statement that the plan sponsor has determined that the plan will become insolvent unless the proposed suspension (and, if applicable, the proposed partition) takes effect, and the year in which insolvency is projected to occur without a suspension of benefits (and, if applicable, a proposed partition); • A statement that insolvency of the plan could result in benefits lower than VerDate Sep<11>2014 15:11 Jun 18, 2015 Jkt 235001 benefits paid under the proposed suspension and a description of the projected benefit payments upon insolvency; • A description of the proposed suspension and its effect, including a description of the different categories or groups affected by the suspension, how those categories or groups are defined, and the formula that is used to calculate the amount of the proposed suspension for individuals in each category or group; • A description of the effect of the proposed suspension on the plan’s projected insolvency; • A description of whether the suspension will remain in effect indefinitely or will expire by its own terms; and • A statement describing the right to vote on the suspension application. The notice of proposed suspension may not include false or misleading information (or omit information so as to cause the information provided to be misleading). The notice is permitted to include information in addition to the required information that is listed under this paragraph IX., including information relating to an application for partition under section 4233 of ERISA, provided that it satisfies these requirements. The notice of proposed suspension must be written in a manner that can be readily understood by the average plan participant. The temporary regulations provide that the Treasury Department will provide a model notice. The use of the model notice will satisfy the content requirement and the readability requirement with respect to the language provided in the model. The temporary regulations provide that notice may be provided in writing or in electronic form to the extent that the electronic form is reasonably accessible to persons to whom the notice is required to be provided. Permissible electronic methods include those permitted under regulations of the Department of Labor at 29 CFR 2520.104b–1(c) and those described at § 54.4980F–1, Q&A–13(c) of the Excise Tax Regulations. Section 432(e)(9)(F) provides that the notice of proposed suspension must be given ‘‘concurrently’’ with the submission of an application to the Treasury Department, but does not specify a precise timeframe for satisfying this requirement. Interpreting ‘‘concurrently’’ as meaning either simultaneously or on the same day was rejected because it would require the difficult synchronization of the plan sponsor’s electronic submission of its application and its giving of notice in PO 00000 Frm 00037 Fmt 4700 Sfmt 4700 35213 written and/or in electronic form. Because the temporary regulations require a plan sponsor to submit its application electronically but authorize it to give notice in writing, interpreting the term ‘‘concurrently’’ to allow a plan sponsor to give written notice a few days earlier than the electronic submission of the application will allow for the receipt of such written notices on or about the time that a plan sponsor submits its application. The temporary regulations thus permit a plan sponsor to give notice no earlier than four business days before the submission of its application. The temporary regulations also anticipate that a plan sponsor is permitted to give written notice no later than four business days after the submission of its application. This period of time will enable the Department of the Treasury to make a preliminary ‘‘completeness check’’ of the application during the first two business days, and the plan sponsor two business days thereafter to give the required notices.12 This approach will help participants by minimizing the risk of confusion and plan expense. For example, if a plan sponsor submits an incomplete application, compiles the additional information, and then finds the individualized estimates that the plan sponsor already gave to be inaccurate (or simply takes too long to compile the additional information), the plan sponsor would have to re-send the notices, increasing the likelihood that the notice would not be understood by the average plan participant as a result of receiving two different notices, each with a different individualized estimate. Although the temporary regulations allow plan sponsors to give participants notice when or before the application is submitted, sponsors are encouraged to delay giving notice until after the Department of the Treasury provides notification that the application is complete. If additional individuals who are entitled to notice are located after the time notice is required to be delivered, the plan sponsor must give those newly located individuals notice as soon as practicable after they are located. The temporary regulations further provide that a notice of proposed suspension satisfies the requirement for notice of a significant reduction in benefits described in section 4980F that would otherwise be required as a result of that suspension of benefits. To the extent that other reductions accompany 12 The completeness check is described under paragraph X. in this preamble (‘‘Approval or denial of an application for suspension of benefits’’). E:\FR\FM\19JNR1.SGM 19JNR1 35214 Federal Register / Vol. 80, No. 118 / Friday, June 19, 2015 / Rules and Regulations rmajette on DSK2TPTVN1PROD with RULES a suspension of benefits, such as a reduction in the future accrual rate described in section 4980F for active participants or a reduction in adjustable benefits under section 432(e)(8), notice that satisfies the requirements (including the applicable timing requirements) of section 4980F or section 432(e)(8), as applicable, must be provided. X. Approval or Denial of an Application for Suspension of Benefits The temporary regulations provide that the plan sponsor of a plan in critical and declining status for a plan year that seeks to suspend benefits must submit an application for approval of the proposed suspension of benefits to the Treasury Department. The Treasury Department will approve, in consultation with the PBGC and the Labor Department, a complete application upon finding that the plan is eligible for the suspension and has satisfied the criteria of section 432(e)(9)(C), (D), (E), and (F). An application must be submitted electronically. After receiving a submission, the plan sponsor will be notified within two business days whether the submission constitutes a complete application. If the submission is a complete application, the application will be treated as submitted on the date on which it was originally submitted to the Treasury Department. If a submission is incomplete, the notification will inform the plan sponsor of the information that is needed to complete the submission and give the plan sponsor a reasonable opportunity to submit a complete application. In such a case, the complete application will be treated as submitted on the date on which the additional information needed to complete the application is submitted to the Treasury Department. Additional guidance that may be necessary or appropriate with respect to applications, including procedures for submitting applications and the information required to be included in a complete application, may be published in the form of revenue procedures, notices, or other guidance published in the Internal Revenue Bulletin. In the case of a plan sponsor that is not submitting an application for suspension in combination with an application to PBGC for a plan partition, the temporary regulations provide that the application for suspension generally will not be accepted unless the proposed effective date of the suspension is at least nine months after the date on which the application is VerDate Sep<11>2014 15:11 Jun 18, 2015 Jkt 235001 submitted. This is to ensure adequate time to review the proposed suspension without a need to delay the effective date of the proposed suspension. A delayed effective date could require other changes to the design of the suspension. For example, if, as a result of a delayed effective date, the age-based limitation under section 432(e)(9)(D)(ii) applies to more participants than under the terms of the proposed suspension, then benefits of other participants may be subject to greater reductions in order to satisfy the limitation in section 432(e)(9)(D)(iv) that the suspension, in the aggregate, must be reasonably estimated to achieve, but not materially exceed, the level necessary to avoid insolvency. However, in appropriate circumstances, an earlier effective date may be permitted. Appropriate circumstances could include an application for a proposed suspension that is a modification of a previous submission that was withdrawn or denied. In the case of an application for suspension in combination with an application for partition, the impact of a delayed effective date for the suspension would be larger benefits for retirees rather than a redesign of the suspension. Accordingly, these temporary regulations do not apply the rule described in the preceding paragraph to such an application. See Part 4233 of the PBGC regulations for a coordinated application process that applies in the case of a plan sponsor that is submitting an application for suspension in combination with an application to PBGC for a plan partition under section 4233 of ERISA. The temporary regulations provide that, no later than 30 days after receiving a complete application, the application will be published on the Web site of the Department of the Treasury, and the Treasury Department will publish a notice in the Federal Register soliciting comments from contributing employers, employee organizations, and participants and beneficiaries of the plan for which an application was made, and other interested parties. The notice soliciting comments will generally request that comments be submitted no later than 45 days after publication of that notice in the Federal Register, but the comment period may be shorter in appropriate circumstances. Appropriate circumstances could include an application for a proposed suspension that is a modification of a previous submission that was withdrawn or denied. Comments received in response to this notice will be made publicly available. PO 00000 Frm 00038 Fmt 4700 Sfmt 4700 Under the temporary regulations, a complete application will be deemed approved unless, within 225 days after the complete application is submitted, the Treasury Department notifies the plan sponsor that its application does not satisfy one or more of the requirements for approval. If the Treasury Department denies a plan sponsor’s application, the notification of the denial will detail the specific reasons for the denial, including reference to the specific requirement or requirements not satisfied. If the Treasury Department approves a plan sponsor’s application and believes that the plan is a systemically important plan, then the Treasury Department will notify the plan sponsor of that belief and that it will be required to provide individual participant data upon request. This data may be used in the event of a vote to reject the suspension in order to assist the Treasury Department in determining whether to permit a modification of the rejected suspension. The temporary regulations provide that the Secretary of the Treasury may appoint a Special Master for purposes of section 432(e)(9). If a Special Master is appointed, the Special Master will be an employee of the Department of the Treasury, will coordinate the implementation of the regulations and the review of applications for the suspension of benefits and other appropriate documents, and will provide recommendations to the Secretary of the Treasury with respect to decisions required under these regulations. Certain rules relating to the Treasury Department’s review of an application under section 432(e)(9)(G) are included in the proposed regulations. XI. Participant Vote on Proposed Benefit Reduction The temporary regulations provide that if an application for suspension is approved by the Treasury Department, then the Treasury Department, in consultation with the PBGC and the Labor Department, will administer a vote of all plan participants and all beneficiaries of deceased participants (eligible voters). Any suspension of benefits will take effect only after the vote and after a final authorization to suspend benefits. Under the temporary regulations, any ballot provided by the plan sponsor in connection with a vote on the suspension must be approved by the Treasury Department, in consultation with the PBGC and the Labor Department. The ballot must be written in a manner that can be readily E:\FR\FM\19JNR1.SGM 19JNR1 rmajette on DSK2TPTVN1PROD with RULES Federal Register / Vol. 80, No. 118 / Friday, June 19, 2015 / Rules and Regulations understood by the average plan participant and may not include any false or misleading information. The information that is required to be included in the ballot is described in the proposed regulations. The temporary regulations provide that unless a majority of all eligible voters vote to reject the suspension, it is permitted to go into effect. If a majority of all eligible voters vote to reject the suspension, the suspension is not permitted to go into effect, except that the suspension or a modified suspension will be permitted to go into effect if the plan is a systemically important plan as described later under this paragraph XI. A plan sponsor is permitted to submit a new suspension application to the Treasury Department for approval in any case in which a suspension is prohibited from taking effect as a result of a vote. The temporary regulations set forth rules for systemically important plans. If a majority of all eligible voters vote to reject the suspension, the Treasury Department will consult with the PBGC and the Labor Department to determine if the plan is a systemically important plan. The Treasury Department is required to make this determination no later than 14 days after the results of the vote are certified. No later than 30 days after a determination that the plan is a systemically important plan, the Participant and Plan Sponsor Advocate selected under section 4004 of ERISA may submit recommendations to the Treasury Department with respect to the suspension or any revisions to the suspension. If a plan is a systemically important plan for which a majority of all eligible voters vote to reject the suspension, then the Treasury Department is required to either permit the implementation of the suspension that was rejected by the vote or permit the implementation of a modification of that suspension. Under any such modification, the plan must be projected to avoid insolvency in accordance with section 432(e)(9)(D)(iv). No later than 60 days after the results of a vote to reject a suspension are certified, the Treasury Department will notify the plan sponsor that the suspension or modified suspension is permitted to be implemented. The temporary regulations define a systemically important plan as a plan with respect to which the PBGC projects that the present value of financial assistance payments will exceed $1.0 billion if the suspension is not implemented. For calendar years beginning after 2015, this dollar amount will be replaced by an amount equal to VerDate Sep<11>2014 15:11 Jun 18, 2015 Jkt 235001 the product of the dollar amount and a fraction, the numerator of which is the contribution and benefit base (determined under section 230 of the Social Security Act) for the preceding calendar year and the denominator of which is the contribution and benefit base for calendar year 2014. If that amount is not a multiple of $1.0 million, it will be rounded to the next lowest multiple of $1.0 million. The temporary regulations provide that, in any case in which a proposed suspension (or a modification of a proposed suspension) is permitted to go into effect, the Treasury Department, in consultation with the PBGC and the Labor Department, will issue a final authorization to suspend with respect to the suspension. If a suspension is permitted to go into effect following a vote, the final authorization will be issued no later than seven days after the vote. If a suspension is permitted to go into effect following a determination that the plan is a systemically important plan, the final authorization will be issued at a time sufficient to allow the implementation of the suspension prior to the end of the 90-day period beginning on the date the results of the vote rejecting the suspension are certified. Under the temporary regulations, no later than 60 days after the certification, the Treasury Department will notify the plan sponsor that the suspension that was rejected by the vote or a modified suspension is permitted to be implemented. The temporary regulations provide that, in any case in which a suspension of benefits with respect to a plan is made in combination with a partition of the plan under section 4233 of ERISA, the suspension of benefits is not permitted to take effect prior to the effective date of the partition. Effective/Applicability Date These regulations apply on and after June 17, 2015 and expire on June 15, 2018. Availability of IRS Documents For copies of recently issued revenue procedures, revenue rulings, notices and other guidance published in the Internal Revenue Bulletin, please visit the IRS Web site at http://www.irs.gov or contact the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. Special Analyses Certain IRS regulations, including this one, are exempt from the requirements of Executive Order 12866, as supplemented and reaffirmed by Executive Order 13563. Therefore, a PO 00000 Frm 00039 Fmt 4700 Sfmt 4700 35215 regulatory impact assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. For the applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6) please refer to the Special Analyses section of the preamble to the crossreferenced notice of proposed rulemaking published in the Proposed Rules section in this issue of the Federal Register. Pursuant to section 7805(f) of the Code, these regulations have been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business. Contact Information For general questions regarding these regulations, please contact the Department of the Treasury at (202) 622–1559 (not a toll-free number). For information regarding a specific application for a suspension of benefits, please contact the Department of the Treasury at (202) 622–1534 (not a tollfree number). List of Subjects 26 CFR Part 1 Income taxes, reporting and recordkeeping requirements. 26 CFR Part 602 Reporting and recordkeeping requirements. Amendments to the Regulations Accordingly, 26 CFR parts 1 and 602 are amended as follows: PART 1—INCOME TAXES Paragraph 1. The authority citation for part 1 continues to read in part as follows: ■ Authority: 26 U.S.C. 7805 * * * Par. 2. Section 1.432(e)(9)–1T is added to read as follows: ■ § 1.432(e)(9)–1T Benefit suspensions for multiemployer plans in critical and declining status (temporary). (a) General rules on suspension of benefits—(1) General rule. Subject to section 432(e)(9)(B) through (I) and paragraphs (b) through (h) of this section, the plan sponsor of a multiemployer plan that is in critical and declining status (within the meaning of section 432(b)(6)) for a plan year may, by plan amendment adopted in the plan year, implement a suspension of benefits that the plan sponsor deems appropriate. Such a suspension is permitted E:\FR\FM\19JNR1.SGM 19JNR1 rmajette on DSK2TPTVN1PROD with RULES 35216 Federal Register / Vol. 80, No. 118 / Friday, June 19, 2015 / Rules and Regulations notwithstanding the anti-cutback provisions of section 411(d)(6). (2) Adoption of plan terms inconsistent with suspension requirements—(i) General rule. A plan may implement (or continue to implement) a reduction of benefits pursuant to a suspension of benefits only if the terms of the plan are consistent with the requirements of section 432(e)(9) and this section. (ii) Changes in level of suspension. [Reserved] (3) Organization of the regulation. This paragraph (a) contains definitions and general rules relating to a suspension of benefits by a multiemployer plan under section 432(e)(9). Paragraph (b) of this section defines a suspension of benefits and describes the length of a suspension, the treatment of beneficiaries and alternate payees under this section, and the requirement to select a retiree representative. Paragraph (c) of this section prescribes certain rules for the actuarial certification and plan-sponsor determinations that must be made in order for a plan to suspend benefits. Paragraph (d) of this section describes certain limitations on suspensions of benefits. Paragraph (e) of this section is reserved for rules on benefit improvements under section 432(e)(9)(E). Paragraph (f) of this section describes the requirement to provide notice in connection with an application to suspend benefits. Paragraph (g) of this section describes certain requirements with respect to the approval or denial of an application for a suspension of benefits. Paragraph (h) of this section contains certain rules relating to the vote on an approved suspension, systemically important plans, and the issuance of a final authorization to suspend benefits. Paragraph (j) of this section provides the effective/applicability date of this section. Paragraph (k) provides the expiration date. (4) Definitions. The following definitions apply for purposes of this section— (i) Pay status. A person is in pay status under a multiemployer plan if, as described in section 432(j)(6), at any time during the current plan year, the person is a participant, beneficiary, or alternate payee under the plan and is paid an early, late, normal, or disability retirement benefit under the plan (or a death benefit under the plan related to a retirement benefit). (ii) Plan sponsor. The term plan sponsor means the association, committee, joint board of trustees, or other similar group of representatives of the parties that establishes or maintains VerDate Sep<11>2014 15:11 Jun 18, 2015 Jkt 235001 the multiemployer plan. However, in the case of a plan described in section 404(c), or a continuation of such a plan, the term plan sponsor means the association of employers that is the employer settlor of the plan. (iii) Effective date of suspension of benefits. [Reserved] (b) Definition of suspension of benefits and related rules—(1) In general—(i) Definition. For purposes of this section, the term suspension of benefits means the temporary or permanent reduction, pursuant to the terms of the plan, of any current or future payment obligation of the plan with respect to any participant under the plan. A suspension of benefits may apply with respect to a participant of the plan regardless of whether the participant, beneficiary, or alternate payee commenced receiving benefits before the effective date of the suspension of benefits. (ii) Plan not liable for suspended benefits. If a plan pays a reduced level of benefits pursuant to a suspension of benefits that complies with the requirements of section 432(e)(9) and this section, then the plan is not liable for any benefits not paid as a result of the suspension. (2) Length of suspension—(i) In general. A suspension of benefits may be of indefinite duration or may expire as of a date that is specified in the plan amendment implementing the suspension. (ii) Effect of a benefit improvement. A plan sponsor may amend the plan to eliminate some or all of a suspension of benefits, provided that the amendment satisfies the requirements that apply to a benefit improvement under section 432(e)(9)(E), in accordance with the rules of paragraph (e) of this section. (3) Treatment of beneficiaries and alternate payees. Except as otherwise specified in this section, all references to suspensions of benefits, increases in benefits, or resumptions of suspended benefits with respect to participants also apply with respect to benefits of beneficiaries or alternate payees (as defined in section 414(p)(8)) of participants. (4) Retiree representative—(i) In general—(A) Requirement to select retiree representative. The plan sponsor of a plan that intends to submit an application for a suspension of benefits and that has reported a total of 10,000 or more participants as of the end of the plan year for the most recently filed Form 5500, ‘‘Annual Return/Report of Employee Benefit Plan,’’ must select a retiree representative. The plan sponsor must select the retiree representative at least 60 days before the date the plan PO 00000 Frm 00040 Fmt 4700 Sfmt 4700 sponsor submits an application to suspend benefits. The retiree representative must be a plan participant who is in pay status. The retiree representative may or may not be a plan trustee. (B) Role of retiree representative. The role of the retiree representative is to advocate for the interests of the retired and deferred vested participants and beneficiaries of the plan throughout the suspension approval process. In the discretion of the plan sponsor, the retiree representative may continue in this role throughout the period of the benefit suspension. (ii) Reasonable expenses from plan. The plan must pay reasonable expenses incurred by the retiree representative, including reasonable expenses for legal and actuarial support, commensurate with the plan’s size and funded status. (iii) Disclosure of information. Upon request, the plan sponsor must promptly provide the retiree representative with relevant information, such as plan documents and data, that is reasonably necessary to enable the retiree representative to perform the role described in paragraph (b)(4)(i)(B) of this section. (iv) Special rules relating to fiduciary status. See section 432(e)(9)(B)(v)(III) for rules relating to the fiduciary status of a retiree representative. (v) Retiree representative for other plans. The plan sponsor of a plan that has reported fewer than 10,000 participants as of the end of the plan year for the most recently filed Form 5500, ‘‘Annual Return/Report of Employee Benefit Plan’’ is permitted to select a retiree representative. The rules in this paragraph (b)(4) (other than the rules in the first two sentences of paragraph (b)(4)(i)(A) of this section concerning the size of the plan and the timing of the appointment of the retiree representative) apply to such a representative. (c) Conditions for suspension—(1) In general—(i) Actuarial certification and initial-plan-sponsor determinations. The plan sponsor of a plan in critical and declining status for a plan year may suspend benefits only if the actuarial certification requirement in paragraph (c)(2) of this section and the initial-plansponsor determinations requirement in paragraph (c)(3) of this section are met. (ii) Annual requirement to make plansponsor determinations. [Reserved] (2) Actuarial certification. A plan satisfies the actuarial certification requirement of this paragraph (c)(2) if, taking into account the proposed suspension of benefits (and, if applicable, a proposed partition of the plan under section 4233 of the E:\FR\FM\19JNR1.SGM 19JNR1 rmajette on DSK2TPTVN1PROD with RULES Federal Register / Vol. 80, No. 118 / Friday, June 19, 2015 / Rules and Regulations Employee Retirement Income Security Act of 1974, Public Law 93–406 (88 Stat. 829 (1974)), as amended (ERISA)), the plan’s actuary certifies that the plan is projected to avoid insolvency within the meaning of section 418E, assuming the suspension of benefits continues until it expires by its own terms or if no such expiration date is set, indefinitely. (3) Initial-plan-sponsor determinations—(i) General rule. A plan satisfies the initial-plan-sponsor determinations requirement of this paragraph (c)(3) only if the plan sponsor determines that— (A) All reasonable measures to avoid insolvency, within the meaning of section 418E, have been taken; and (B) The plan is projected to become insolvent within the meaning of section 418E unless the proposed suspension of benefits (or another suspension of benefits under section 432(e)(9)) is implemented for the plan. (ii) Factors. In making its determination that all reasonable measures to avoid insolvency, within the meaning of section 418E, have been taken, the plan sponsor may take into account the following non-exclusive list of factors— (A) Current and past contribution levels; (B) Levels of benefit accruals (including any prior reductions in the rate of benefit accruals); (C) Prior reductions (if any) of adjustable benefits; (D) Prior suspensions (if any) of benefits under this section; (E) The impact on plan solvency of the subsidies and ancillary benefits available to active participants; (F) Compensation levels of active participants relative to employees in the participants’ industry generally; (G) Competitive and other economic factors facing contributing employers; (H) The impact of benefit and contribution levels on retaining active participants and bargaining groups under the plan; (I) The impact of past and anticipated contribution increases under the plan on employer attrition and retention levels; and (J) Measures undertaken by the plan sponsor to retain or attract contributing employers. (iii) Reliance on certification of critical and declining status. For purposes of the insolvency projection under paragraph (c)(3)(i)(B) of this section, a plan sponsor may rely on the actuarial certification made pursuant to section 432(b)(3)(A)(i) that the plan is in critical and declining status for the plan year in making the determination that VerDate Sep<11>2014 15:11 Jun 18, 2015 Jkt 235001 the plan is projected to become insolvent unless benefits are suspended. (4) Annual-plan-sponsor determinations. [Reserved] (5) Failure to make annual-plansponsor determinations. [Reserved] (d) Limitations on suspension—(1) In general. Any suspension of benefits with respect to a participant made by a plan sponsor pursuant to this section is subject to the individual limitations of sections 432(e)(9)(D)(i) through (iii), in accordance with the rules of paragraphs (d)(2) through (d)(4) of this section. After applying the individual limitations in sections 432(e)(9)(D)(i) through (iii), in accordance with the rules of paragraphs (d)(2) through (d)(4) of this section, the overall size and distribution of the suspension is subject to the aggregate limitations of sections 432(e)(9)(D)(iv) and (vi) in accordance with the rules of paragraphs (d)(5) and (d)(6) of this section. See section 432(e)(9)(D)(vii) for additional rules applicable to certain plans. (2) Guarantee-based limitation—(i) General rule. The monthly benefit with respect to any participant may not be reduced below 110 percent of the monthly benefit payable to a participant, beneficiary, or alternate payee that would be guaranteed by the Pension Benefit Guaranty Corporation (PBGC) under section 4022A of ERISA if the plan were to become insolvent as of the effective date of the suspension. (ii) PBGC guarantee. [Reserved] (iii) Calculation of accrual rate. [Reserved] (iv) Special rules for non-vested participants. [Reserved] (v) Examples. [Reserved] (3) Age-based limitation. [Reserved] (4) Disability-based limitation—(i) General rule. Benefits based on disability (as defined under the plan) may not be suspended. (ii) Benefits based on disability. [Reserved] (5) Limitation on aggregate size of suspension. [Reserved] (6) Equitable distribution. [Reserved] (7) Effective date of suspension made in combination with partition. In any case in which a suspension of benefits with respect to a plan is made in combination with a partition of the plan, the suspension of benefits may not take effect prior to the effective date of the partition. This requirement will not be satisfied if the partition order under section 4233 of ERISA has not been provided to the Secretary of the Treasury by the last day of the 225-day period described in paragraph (g)(3)(i) of this section. (e) Benefit improvements. [Reserved] (f) Notice requirements—(1) In general. No suspension of benefits may PO 00000 Frm 00041 Fmt 4700 Sfmt 4700 35217 be made pursuant to this section unless notice of the proposed suspension has been given by the plan sponsor to— (i) All participants, beneficiaries of deceased participants, and alternate payees under the plan (regardless of whether their benefits are proposed to be suspended), except those who cannot be contacted by reasonable efforts; (ii) Each employer who has an obligation to contribute (within the meaning of section 4212(a) of ERISA) under the plan; and (iii) Each employee organization which, for purposes of collective bargaining, represents plan participants employed by an employer described in paragraph (f)(1)(ii) of this section. (2) Content of notice—(i) In general. The notice described under paragraph (f)(1) of this section must contain— (A) Sufficient information to enable a participant or beneficiary to understand the effect of any suspension of benefits, including an individualized estimate (on an annual or monthly basis) of the effect on that participant or beneficiary; (B) A description of the factors considered by the plan sponsor in designing the benefit suspension; (C) A statement that the application for approval of any suspension of benefits will be available on the Web site of the Department of the Treasury and that comments on the application will be accepted; (D) Information as to the rights and remedies of plan participants and beneficiaries; (E) If applicable, a statement describing the appointment of a retiree representative, the date of appointment of the representative, the role and responsibilities of the retiree representative, identifying information about the retiree representative (including whether the representative is a plan trustee), and how to contact the retiree representative; and (F) Information on how to contact the Department of the Treasury for further information and assistance where appropriate. (ii) Description of suspension of benefits. The notice described under paragraph (f)(1) of this section will not satisfy the requirements of paragraph (f)(2)(i) of this section unless it includes the following— (A) If it is not possible to provide an individualized estimate on an annual or monthly basis of the quantitative effect of the suspension on a participant or beneficiary, such as in the case of a suspension that affects the payment of any future cost-of-living adjustment, a narrative description of the effect of the suspension; E:\FR\FM\19JNR1.SGM 19JNR1 rmajette on DSK2TPTVN1PROD with RULES 35218 Federal Register / Vol. 80, No. 118 / Friday, June 19, 2015 / Rules and Regulations (B) A statement that the plan sponsor has determined that the plan will become insolvent unless the proposed suspension takes effect, and the year in which insolvency is projected to occur without a suspension of benefits; (C) A statement that insolvency of the plan could result in benefits lower than benefits paid under the proposed suspension and a description of the projected benefit payments upon insolvency; (D) A description of the proposed suspension and its effect, including a description of the different categories or groups affected by the suspension, how those categories or groups are defined, and the formula that is used to calculate the amount of the proposed suspension for individuals in each category or group; (E) A description of the effect of the proposed suspension on the plan’s projected insolvency; (F) A description of whether the suspension will remain in effect indefinitely or will expire by its own terms; and (G) A statement describing the right to vote on the suspension application. (iii) Readability requirement. A notice given under paragraph (f)(1) of this section must be written in a manner that is readily understandable by the average plan participant. (iv) Model notice. The Secretary of the Treasury will provide a model notice. The use of the model notice will satisfy the content and readability requirements of this paragraph (f)(2) with respect to the language provided in the model. (3) Form and manner—(i) Timing— (A) In general. A notice under paragraph (f)(1) of this section must be given no earlier than four business days before the date on which an application is submitted and no later than two business days after the Secretary of the Treasury notifies the plan sponsor that it has submitted a complete application, as described in paragraph (g)(1)(ii) of this section. (B) Timing for lost participants. If additional individuals who are entitled to notice are located after the time period in paragraph (f)(3)(i)(A) of this section has elapsed, then the plan sponsor must give notice to these individuals as soon as practicable thereafter. (ii) Method of delivery of notice—(A) Written or electronic delivery. A notice given under paragraph (f)(1) of this section may be provided in writing. It may also be provided in electronic form to the extent that the form is reasonably accessible to persons to whom the notice is required to be provided. VerDate Sep<11>2014 15:11 Jun 18, 2015 Jkt 235001 Permissible electronic methods include those permitted under regulations of the Department of Labor at 29 CFR 2520.104b–1(c) and those described at § 54.4980F–1, Q&A–13(c) of the Excise Tax Regulations. (B) No alternative method of delivery. [Reserved] (iii) Additional information in notice. A notice given under paragraph (f)(1) of this section is permitted to include information in addition to the information that is required under paragraph (f)(2) of this section, including, if applicable, information relating to an application for partition under section 4233 of ERISA (such as the model notice at Appendix A of 29 CFR part 4233), provided that the requirements of paragraph (f)(3)(iv) of this section are satisfied. (iv) No false or misleading information. A notice given under paragraph (f)(1) of this section may not include false or misleading information (or omit information in a manner that causes the information provided to be misleading). (4) Other notice requirement. Any notice given under paragraph (f)(1) of this section satisfies the requirement for notice of a significant reduction in benefits described in section 4980F that would otherwise be required as a result of that suspension of benefits. To the extent that there are other reductions that accompany a suspension of benefits, such as a reduction in the future accrual rate described in section 4980F for active participants or a reduction in adjustable benefits under section 432(e)(8), notice that satisfies the requirements (including the applicable timing requirements) of section 4980F or section 432(e)(8), as applicable, must be provided. (5) Examples. The following examples illustrate the requirement in paragraph (f)(1)(i) of this section to give notice to all participants, beneficiaries of deceased participants, and alternate payees, except those who cannot be contacted by reasonable efforts. Example 1. (i) Facts. A plan sponsor distributes notice of a proposed suspension of benefits to plan participants, beneficiaries of deceased participants, and alternate payees by mailing the notice to their last known mailing addresses, using the same information that it used to send the most recent annual funding notice. Of 5,000 such notices, 300 were returned as undeliverable. The plan sponsor takes no additional steps to contact the individuals for whom the notice was returned as undeliverable. (ii) Conclusion. The plan sponsor did not make any effort beyond the initial mailing to locate the 300 individuals for whom the notice was returned as undeliverable. Therefore, the plan sponsor did not satisfy PO 00000 Frm 00042 Fmt 4700 Sfmt 4700 the requirement to provide notice to all participants, beneficiaries of deceased participants, and alternate payees under the plan (regardless of whether their benefits are proposed to be suspended), except those who cannot be contacted by reasonable efforts. Example 2. (i) Facts. The facts are the same as Example 1, but the plan sponsor contacts the bargaining parties to locate the missing individuals for whom the notice was returned as undeliverable. The plan sponsor then uses an Internet search tool, a credit reporting agency, and a commercial locator service to search for individuals for whom it was not able to obtain updated information from bargaining parties. Through these efforts, the plan sponsor locates the updated addresses of 250 of the 300 individuals whom it previously failed to contact. The plan sponsor mails notices to those individuals within one week of locating them. (ii) Conclusion. By using effective search methods to find the previously missing individuals and promptly mailing the notice of suspension to them, the plan sponsor has satisfied the requirement to provide notice to all participants, beneficiaries of deceased participants, and alternate payees under the plan (regardless of whether their benefits are proposed to be suspended), except those who cannot be contacted by reasonable efforts. (g) Approval or denial of an application for suspension of benefits— (1) Application—(i) In general. The plan sponsor of a plan in critical and declining status for a plan year that seeks to suspend benefits must submit an application for approval of the proposed suspension of benefits to the Secretary of the Treasury. The Secretary of the Treasury will approve, in consultation with the PBGC and the Secretary of Labor, a complete application described in paragraph (g)(1)(ii) of this section upon finding that the plan is eligible for the suspension and has satisfied the criteria of section 432(e)(9)(C), (D), (E), and (F), in accordance with the rules of paragraphs (c), (d), (e), and (f) of this section. (ii) Complete application. After receiving a submission, the plan sponsor will be notified within two business days whether the submission constitutes a complete application. A complete application will be treated as submitted on the date that it was originally submitted to the Secretary of the Treasury. If a submission is incomplete, the notification will inform the plan sponsor of the information that is needed to complete the submission and give the plan sponsor a reasonable opportunity to submit a complete application. In such a case, the complete application will be treated as submitted on the date on which the additional information needed to complete the application is submitted to the Secretary of the Treasury. E:\FR\FM\19JNR1.SGM 19JNR1 rmajette on DSK2TPTVN1PROD with RULES Federal Register / Vol. 80, No. 118 / Friday, June 19, 2015 / Rules and Regulations (iii) Submission of application. An application described in this paragraph (g)(1) must be submitted electronically. (iv) Requirements for application. Additional guidance that may be necessary or appropriate with respect to applications described in this paragraph (g)(1), including procedures for submitting applications and the information required to be included in a complete application, may be published in the form of revenue procedures, notices, or other guidance in the Internal Revenue Bulletin. (v) Requirement to provide adequate time to process application. An application for suspension that is not submitted in combination with an application to PBGC for a plan partition under section 4223 of ERISA generally will not be accepted unless the proposed effective date of the suspension is at least nine months from the date on which the application is submitted. However, in appropriate circumstances, an earlier effective date may be permitted. (vi) Plan sponsors that also apply for partition. See Part 4233 of the PBGC regulations for a coordinated application process that applies in the case of a plan sponsor that is submitting an application for suspension in combination with an application to PBGC for a plan partition under section 4233 of ERISA. (2) Solicitation of comments—(i) In general. Not later than 30 days after receipt of a complete application described in paragraph (g)(1) of this section— (A) The application for approval of the suspension of benefits will be published on the Web site of the Department of the Treasury; and (B) The Secretary of the Treasury will publish a notice in the Federal Register soliciting comments from contributing employers, employee organizations, and participants and beneficiaries of the plan for which an application was made, and other interested parties. (ii) Public comments. The notice described in paragraph (g)(2)(i)(B) of this section will generally request that comments be submitted no later than 45 days after publication of that notice in the Federal Register, but the comment period may be shorter in appropriate circumstances. Comments received in response to this notice will be made publicly available. (3) Approval or denial—(i) Deemed approval. A complete application described in paragraph (g)(1)(ii) of this section will be deemed approved unless, within 225 days following the date that the complete application is submitted, the Secretary of the Treasury VerDate Sep<11>2014 15:11 Jun 18, 2015 Jkt 235001 notifies the plan sponsor that its application does not satisfy one or more of the requirements described in this paragraph (g). (ii) Notice of denial. If the Secretary of the Treasury denies a plan sponsor’s application, the notification of the denial will detail the specific reasons for the denial, including reference to the specific requirement not satisfied. (iii) Special rules for systemically important plans. If the Secretary of the Treasury approves a plan sponsor’s application and the Secretary believes that the plan is or may be a systemically important plan (as defined in paragraph (h)(5)(iv) of this section), the Secretary will notify the plan sponsor of that belief and that it will be required to provide individual participant data upon request. In such a case, this data would be used in the event of a vote to reject the suspension (as described in paragraph (h)(4) of this section) in order to assist the Secretary in determining whether to permit a modification of the rejected suspension. (iv) Agreement to stay 225-day period. [Reserved] (4) Consideration of certain factors. [Reserved] (5) Standard for accepting plan sponsor determinations. [Reserved] (6) Plan-sponsor certifications with respect to plan amendments. [Reserved] (7) Special Master. The Secretary of the Treasury may appoint a Special Master for purposes of this section. If a Special Master is appointed, the Special Master will coordinate the implementation of this section and the review of applications for the suspension of benefits and other appropriate documents, and will provide recommendations to the Secretary of the Treasury with respect to decisions required under this section. (h) Participant vote on proposed benefit reduction—(1) Requirement for vote—(i) In general. If an application for suspension is approved under paragraph (g) of this section, then the Secretary of the Treasury, in consultation with the PBGC and the Secretary of Labor, will administer a vote of all plan participants and beneficiaries of deceased participants (eligible voters), as described in section 432(e)(9)(H) and this paragraph (h). Any suspension of benefits will take effect only after the vote and after a final authorization to suspend benefits under paragraph (h)(6) of this section. (ii) Communication by plan sponsor. [Reserved] (2) Administration of vote. [Reserved] (3) Ballots—(i) In general. [Reserved] (ii) Additional rules—(A) Readability requirement. A ballot provided under PO 00000 Frm 00043 Fmt 4700 Sfmt 4700 35219 section 432(e)(9)(H)(iii), in accordance with the rules of paragraph (h)(3)(i) of this section, must be written in a manner that is readily understandable by the average plan participant. (B) No false or misleading information. A ballot provided under section 432(e)(9)(H)(iii), in accordance with the rules of paragraph (h)(3)(i) of this section, may not include false or misleading information (or omit information in a manner that causes the information provided to be misleading). (iii) Ballot must be approved. Any ballot provided under section 432(e)(9)(H)(iii), in accordance with the rules of paragraph (h)(3)(i) of this section, must be approved by the Secretary of the Treasury, in consultation with the PBGC and the Secretary of Labor, before it is provided. (4) Implementing suspension following vote—(i) In general. Unless a majority of all eligible voters vote to reject the suspension that was approved under paragraph (g) of this section, the suspension will be permitted to go into effect. If a majority of all eligible voters vote to reject the suspension that was approved under paragraph (g) of this section, a suspension of benefits will not be permitted to go into effect except as provided under paragraph (h)(5)(iii) of this section relating to the implementation of a suspension for a systemically important plan (as defined in paragraph (h)(5)(iv) of this section). (ii) Effect of not sending ballot. [Reserved] (5) Systemically important plans—(i) In general. If a majority of all eligible voters vote to reject the suspension that was approved under paragraph (g) of this section, the Secretary of the Treasury will consult with the PBGC and the Secretary of Labor to determine if the plan is a systemically important plan. This determination will be made no later than 14 days after the results of the vote are certified. (ii) Recommendations from Participant and Plan Sponsor Advocate. Not later than 30 days after a determination that the plan is a systemically important plan, the Participant and Plan Sponsor Advocate selected under section 4004 of ERISA may submit recommendations to the Secretary of the Treasury with respect to the suspension that was approved under paragraph (g) of this section or any revisions to the suspension. (iii) Implementation of original or modified suspension by systemically important plans. If a plan is a systemically important plan for which a majority of all eligible voters vote to reject the suspension that was approved under paragraph (g) of this section, then E:\FR\FM\19JNR1.SGM 19JNR1 rmajette on DSK2TPTVN1PROD with RULES 35220 Federal Register / Vol. 80, No. 118 / Friday, June 19, 2015 / Rules and Regulations the Secretary of the Treasury must determine whether to permit the implementation of the suspension that was approved under paragraph (g) of this section or whether to permit the implementation of a modification of that suspension. Under any such modification, the plan must be projected to avoid insolvency in accordance with section 432(e)(9)(D)(iv). No later than 60 days after the results of a vote to reject a suspension are certified, the Secretary of the Treasury will notify the plan sponsor that the suspension or modified suspension is permitted to be implemented. (iv) Systemically important plan defined—(A) In general. For purposes of this paragraph (h)(5), a systemically important plan is a plan with respect to which the PBGC projects that the present value of financial assistance payments will exceed $1.0 billion if the suspension is not implemented. (B) Indexing. For calendar years beginning after 2015, the dollar amount specified in paragraph (h)(5)(iv)(A) of this section will be replaced with an amount equal to the product of the dollar amount and a fraction, the numerator of which is the contribution and benefit base (determined under section 230 of the Social Security Act) for the preceding calendar year and the denominator of which is the contribution and benefit base for calendar year 2014. If the amount otherwise determined under this paragraph (h)(5)(iv)(B) is not a multiple of $1.0 million, the amount will be rounded to the next lowest multiple of $1.0 million. (6) Final authorization to suspend—(i) In general. In any case in which a suspension is permitted to go into effect following a vote pursuant to section 432(e)(9)(H)(ii) and paragraph (h)(4) of this section, the Secretary of the Treasury, in consultation with the PBGC and the Secretary of Labor, will issue a final authorization to suspend with respect to the suspension not later than seven days after the vote. (ii) Systemically important plans. In any case in which a suspension is permitted to go into effect following a determination under paragraph (h)(5) of this section that the plan is a systemically important plan, the Secretary of the Treasury, in consultation with the PBGC and the Secretary of Labor, will issue a final authorization to suspend, at a time sufficient to allow the implementation of the suspension prior to the end of the 90-day period beginning on the date the results of the vote are certified. (iii) Plan partitions. Notwithstanding any other provision of this section, in VerDate Sep<11>2014 15:11 Jun 18, 2015 Jkt 235001 any case in which a suspension of benefits with respect to a plan is made in combination with a partition of the plan, the suspension of benefits is not permitted to take effect prior to the effective date of the partition. (i) [Reserved]. (j) Effective/applicability date. This section applies on and after June 17, 2015. (k) Expiration date. The applicability of this section expires on June 15, 2018. PART 602—OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT Par. 3. The authority citation for part 602 continues to read as follows: ■ Authority: 26 U.S.C. 7805 Par. 4. In § 602.101, paragraph (b) is amended by adding the following entry in numerical order to the table to read as follows: ■ § 602.101 * OMB Control numbers. * * (b) * * * * * CFR Part or section where identified and described * * * 1.432(e)(9)–1T ...................... * * * Current OMB control no. * * 1545–2260 * * John Dalrymple, Deputy Commissioner for Services and Enforcement. Approved: June 9, 2015. Mark J. Mazur, Assistant Secretary of the Treasury (Tax Policy). [FR Doc. 2015–14945 Filed 6–17–15; 11:15 am] BILLING CODE 4830–01–P PENSION BENEFIT GUARANTY CORPORATION 29 CFR Part 4233 RIN 1212–AB29 Partitions of Eligible Multiemployer Plans Pension Benefit Guaranty Corporation. ACTION: Interim final rule. AGENCY: This document contains an interim final rule prescribing the application process and notice requirements for partitions of eligible multiemployer plans under title IV of the Employee Retirement Income Security Act of 1974 (ERISA), as SUMMARY: PO 00000 Frm 00044 Fmt 4700 Sfmt 4700 amended by the Multiemployer Pension Reform Act of 2014 (MPRA). The interim final rule is published pursuant to section 122 of MPRA in order to carry out the provisions of section 4233 of ERISA. PBGC is soliciting public comments on the interim final regulation. DATES: Effective June 19, 2015. Comments must be submitted on or before August 18, 2015. ADDRESSES: Comments, identified by Regulation Identifier Number (RIN) 1212–AB29, may be submitted by any of the following methods: • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the Web site instructions for submitting comments. • Email: reg.comments@pbgc.gov. • Fax: 202–326–4112. • Mail or Hand Delivery: Regulatory Affairs Group, Office of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005–4026. All submissions must include the Regulation Identifier Number for this rulemaking (RIN 1212–AB29). Comments received, including personal information provided, will be posted to www.pbgc.gov. Copies of comments may also be obtained by writing to Disclosure Division, Office of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005–4026, or calling 202–326–4040 during normal business hours. (TTY and TDD users may call the Federal relay service tollfree at 1–800–877–8339 and ask to be connected to 202–326–4040.) FOR FURTHER INFORMATION CONTACT: Joseph J. Shelton (shelton.joseph@ pbgc.gov), Assistant General Counsel, Office of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005– 4026; 202–326–4400, ext. 6559; Kimberly J. Duplechain (duplechain.kimberly@pbgc.gov), Deputy Assistant General Counsel, Office of the General Counsel, 202–326– 4400, ext. 3028. SUPPLEMENTARY INFORMATION: Executive Summary Purpose of the Regulatory Action This interim final rule implements provisions of the Multiemployer Pension Reform Act of 2014 (MPRA) 1 that prescribe the statutory conditions and notice requirements that must be met before PBGC may partition an 1 Division O of the Consolidated and Further Continuing Appropriations Act, 2015, Public Law 113–235 (128 Stat. 2130 (2014)). E:\FR\FM\19JNR1.SGM 19JNR1

Agencies

[Federal Register Volume 80, Number 118 (Friday, June 19, 2015)]
[Rules and Regulations]
[Pages 35207-35220]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-14945]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 602

[TD 9723]
RIN 1545-BM73


Suspension of Benefits Under the Multiemployer Pension Reform Act 
of 2014

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations.

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SUMMARY: This document contains temporary regulations relating to 
multiemployer pension plans that are projected to have insufficient 
funds, at some point in the future, to pay the full benefits to which 
individuals will be entitled under the plans (referred to as plans in 
``critical and declining status''). The Multiemployer Pension Reform 
Act of 2014 (``MPRA'') amended the Internal Revenue Code to incorporate 
suspension of benefits provisions that permit these multiemployer plans 
to reduce pension benefits payable to participants and beneficiaries if 
certain conditions are satisfied. MPRA requires the Secretary of the 
Treasury, in consultation with the Pension Benefit Guaranty Corporation 
and the Secretary of Labor, to approve or deny applications by these 
plans to reduce benefits. As required by MPRA, these temporary 
regulations, together with proposed regulations being published at the 
same time, provide guidance implementing these statutory provisions. 
These temporary regulations affect active, retired, and deferred vested 
participants and beneficiaries of multiemployer plans that are in 
critical and declining status as well as employers contributing to, and 
sponsors and administrators of, those plans. The text of these 
temporary regulations also serves, in part, as the text of the proposed 
regulations (REG-102648-15) set forth in the notice of proposed 
rulemaking on this subject in the Proposed Rules section of this issue 
of the Federal Register.

DATES: Effective Date: These regulations are effective on June 19, 
2015.
    Applicability Date: For date of applicability, see Sec.  
1.432(e)(9)-1T(j).

FOR FURTHER INFORMATION CONTACT: The Department of the Treasury MPRA 
guidance information line at (202) 622-1559 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    These temporary regulations are being issued without prior notice 
and public procedure pursuant to the Administrative Procedure Act (5 
U.S.C. 553). For this reason, the collection of information contained 
in these regulations has been reviewed and, pending receipt and 
evaluation of public comments, approved by the Office of Management and 
Budget under control number 1545-2260.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid control number.
    For further information concerning this collection of information, 
and where to submit comments on the collection of information and the 
accuracy of the estimated burden, and suggestions for reducing this 
burden,

[[Page 35208]]

please refer to the preamble to the cross-referenced notice of proposed 
rulemaking on this subject in the Proposed Rules section in this issue 
of the Federal Register.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background

Overview

    Section 432(e)(9) \1\ of the Internal Revenue Code (Code) permits 
the plan sponsor of a multiemployer plan that is projected to have 
insufficient funds, at some point in the future, to pay the full 
benefits to which individuals will be entitled under the plan (referred 
to as a plan in ``critical and declining status'') to reduce the 
pension benefits payable to participants and beneficiaries under the 
plan if certain conditions are satisfied (referred to as a ``suspension 
of benefits''). MPRA requires the Secretary of the Treasury, in 
consultation with the Pension Benefit Guaranty Corporation and the 
Secretary of Labor (generally referred to in this preamble as the 
Treasury Department, PBGC, and Labor Department, respectively), to 
issue appropriate guidance to implement the provisions of section 
432(e)(9). This document contains temporary regulations under section 
432(e)(9) that, together with proposed regulations that are being 
published elsewhere in this issue of the Federal Register and a revenue 
procedure being published in the Internal Revenue Bulletin, Rev. Proc. 
2015-34, implement section 432(e)(9) as required by the statute. The 
Treasury Department consulted with the PBGC and the Labor Department on 
these temporary regulations.
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    \1\ Section 432(e)(9) was added to the Internal Revenue Code by 
the Pension Protection Act of 2006, Public Law 109-280 (120 Stat. 
780 (2006)) (PPA '06) and amended by the Multiemployer Pension 
Reform Act of 2014, Division O of the Consolidated and Further 
Continuing Appropriations Act, 2015, Public Law 113-235 (128 Stat. 
2130 (2014)) (MPRA).
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    The temporary regulations in this document, which are applicable 
immediately, provide sufficient guidance to enable a plan sponsor that 
wishes to apply for approval of a suspension of benefits to prepare and 
submit such an application, and to enable the Department of the 
Treasury to begin the processing of such an application. The temporary 
regulations provide general guidance regarding section 432(e)(9), 
including guidance regarding the meaning of the term ``suspension of 
benefits,'' the general conditions for a suspension of benefits, and 
the implementation of a suspension after a participant vote. The notice 
of proposed rulemaking, published elsewhere in this issue of the 
Federal Register, includes the proposed regulations and requests 
comments on the provisions of the proposed regulations as well as these 
temporary regulations. The provisions of the temporary regulations and 
proposed regulations are expected to be integrated and issued as a 
single set of final regulations with any changes that are made 
following consideration of the comments.
    The proposed regulations, which are not applicable immediately, 
contain additional provisions with respect to which the Department of 
the Treasury intends to consider public comments before finalizing a 
decision to approve an application for suspension of benefits. The 
proposed regulations also provide additional guidance regarding section 
432(e)(9), including guidance relating to the standards that will be 
applied in reviewing an application for suspension of benefits and the 
statutory limitations on a suspension of benefits.
    The regulations implementing the statutory suspension of benefits 
provisions have been divided, as described, into temporary regulations 
and proposed regulations in order to balance the interest in 
considering public comments on rules before they apply with the evident 
statutory intent, reflected in MPRA, to implement the statutory 
provisions without undue delay. Although the Department of the Treasury 
is issuing proposed and temporary regulations under section 432(e)(9), 
it is expected that no application proposing a benefit suspension will 
be approved prior to the issuance of final regulations. If a plan 
sponsor chooses to submit an application for approval of a proposed 
benefit suspension in accordance with the proposed and temporary 
regulations before the issuance of final regulations, then the plan 
sponsor may need to revise the proposed suspension (and potentially the 
related notices to plan participants) or supplement the application to 
take into account any differences in the requirements relating to 
suspensions of benefits that might be included in the final 
regulations.
    Rev. Proc. 2015-34 prescribes the specifics of the application 
process for approval of a proposed benefit suspension. The revenue 
procedure also provides a model notice that a plan sponsor proposing a 
benefit suspension may use to satisfy the statutory notice requirement.

Statutory Background

    Code section 412 contains minimum funding rules that generally 
apply to pension plans. Code section 431, added by section 211 of PPA 
'06, sets forth the funding rules that apply specifically to 
multiemployer defined benefit plans. Code section 432, added by section 
212 of PPA '06, sets forth additional rules that apply to certain 
multiemployer plans in endangered or critical status, and permits plans 
in critical status to be amended to reduce certain otherwise protected 
benefits (referred to as adjustable benefits). Section 202 of PPA '06 
amended section 305 of the Employee Retirement Income Security Act of 
1974, Public Law 93-406 (88 Stat. 829 (1974)), as amended (ERISA), to 
prescribe parallel rules. PPA '06 provided that Code section 432 and 
ERISA section 305 would sunset for plan years beginning after December 
31, 2014. However, section 101 of MPRA made them permanent, with 
certain modifications.
    Section 201 of MPRA amended Code section 432 to add a new status, 
called critical and declining status, for multiemployer defined benefit 
plans. Section 432(b)(6) provides that a plan in critical status is 
treated as being in critical and declining status if the plan satisfies 
the criteria for critical status and in addition is projected to become 
insolvent within the meaning of section 418E during the current plan 
year or any of the 14 succeeding plan years (or 19 succeeding plan 
years if the plan has a ratio of inactive participants to active 
participants that exceeds two to one or if the funded percentage of the 
plan is less than 80 percent). Section 201 of MPRA also amended Code 
section 432(e)(9) to prescribe benefit suspension rules for plans in 
critical and declining status.\2\
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    \2\ Section 201 of MPRA makes parallel amendments to section 305 
of ERISA and the Department of the Treasury has interpretive 
jurisdiction over the subject matter of these provisions under ERISA 
as well as the Code. See also section 101 of Reorganization Plan No. 
4 of 1978 (43 FR 47713).
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    MPRA was enacted on December 16, 2014. Section 201(b)(7) of MPRA 
provides that, not later than 180 days after the date of enactment, the 
Treasury Department, in consultation with the PBGC and the Labor 
Department, is required to publish appropriate guidance to implement 
section 432(e)(9). Section 201(c) of MPRA provides that the amendments 
made by section 201 will take effect on the date of enactment.

[[Page 35209]]

    On February 18, 2015, the Department of the Treasury issued a 
Request for Information on Suspensions of Benefits under the 
Multiemployer Pension Reform Act of 2014 in the Federal Register (80 FR 
8578). The Request for Information included questions focusing on 
certain matters to be addressed in guidance implementing section 
432(e)(9) and indicated that multiemployer plans should not submit 
applications for suspensions of benefits prior to a date specified in 
such future guidance. These temporary regulations, and the proposed 
regulations published elsewhere in this issue of the Federal Register, 
reflect consideration of comments received in response to the Request 
for Information.

Definition of Suspension of Benefits and General Rules Under Section 
432(e)(9)(A) and 432(e)(9)(B)(i) Through (iv)

    Section 201 of MPRA prescribes benefit suspension rules for 
multiemployer defined benefit plans in critical and declining status. 
Section 432(e)(9)(A) provides that notwithstanding section 411(d)(6) 
and subject to section 432(e)(9)(B) through (I), the plan sponsor of a 
plan in critical and declining status may, by plan amendment, suspend 
benefits that the sponsor deems appropriate.
    The statute defines suspension of benefits as the temporary or 
permanent reduction of any current or future payment obligation of the 
plan to any participant or beneficiary under the plan, whether or not 
in pay status at the time of the suspension of benefits. Any suspension 
will remain in effect until the earlier of when the plan sponsor 
provides benefit improvements in accordance with section 432(e)(9)(E) 
or when the suspension expires by its own terms. Thus, if a suspension 
does not expire by its own terms, it continues indefinitely.
    Under the statute, a plan will not be liable for any benefit 
payments not made as a result of a suspension of benefits. All 
references to suspensions of benefits, increases in benefits, or 
resumptions of suspended benefits with respect to participants will 
also apply with respect to benefits of beneficiaries or alternative 
payees \3\ of participants. See section 432(e)(9)(B)(iv).
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    \3\ The Department of the Treasury and the IRS understand this 
provision to refer to alternate payees.
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Retiree Representative

    In the case of a plan with 10,000 or more participants, section 
432(e)(9)(B)(v) requires the plan sponsor to select a plan participant 
in pay status to act as a retiree representative. The retiree 
representative is required to advocate for the interests of the retired 
and deferred vested participants and beneficiaries of the plan 
throughout the suspension approval process. The plan must provide for 
the retiree representative's reasonable expenses, including reasonable 
legal and actuarial support, commensurate with the plan's size and 
funded status.

Conditions for Suspensions

    Section 432(e)(9)(C) sets forth conditions that must be satisfied 
before a plan sponsor of a plan in critical and declining status for a 
plan year may suspend benefits. Under one of the conditions, the plan 
actuary must certify, taking into account the proposed suspension of 
benefits (and, if applicable, a proposed partition of the plan under 
section 4233 of ERISA (partition)), that the plan is projected to avoid 
insolvency within the meaning of section 418E, assuming the suspension 
of benefits continues until it expires by its own terms or if no such 
expiration date is set, indefinitely.
    Another condition requires a plan sponsor to determine, in a 
written record to be maintained throughout the period of the benefit 
suspension, that although all reasonable measures to avoid insolvency 
have been taken (and continue to be taken during the period of the 
benefit suspension), the plan is still projected to become insolvent 
unless benefits are suspended. In making this determination, the plan 
sponsor may take into account factors including a specified list of 10 
statutory factors.\4\ See section 432(e)(9)(C)(ii).
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    \4\ These 10 factors are current and past contribution levels; 
levels of benefit accruals (including prior reductions in the rate 
of benefit accruals); prior adjustable benefit reductions and 
suspensions of benefits; the impact on plan solvency of the 
subsidies and ancillary benefits available to active participants; 
compensation levels of active participants relative to employees in 
the participants' industry generally; competitive and other economic 
factors facing contributing employers; the impact of benefit and 
contribution levels on retaining active participants and bargaining 
groups under the plan; the impact of past and anticipated 
contribution increases under the plan on employer attrition and 
retention levels; and measures undertaken by the plan sponsor to 
retain or attract contributing employers.
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Limitations on Suspensions

    Section 432(e)(9)(D) contains limitations on the benefits that may 
be suspended, some of which apply to plan participants and 
beneficiaries on an individual basis and some of which apply on an 
aggregate basis. Under the statute, an individual's monthly benefit may 
not be reduced below 110 percent of the monthly benefit that is 
guaranteed by the PBGC under section 4022A of ERISA on the date of the 
suspension. In addition, no benefits based on disability (as defined 
under the plan) may be suspended.
    In the case of a participant or beneficiary who has attained age 75 
as of the effective date of a suspension, section 432(e)(9)(D)(ii) 
provides that the suspension may not exceed the applicable percentage 
of the individual's maximum suspendable benefit (the age-based 
limitation). The maximum suspendable benefit is the maximum amount of 
an individual's benefit that would be suspended without regard to the 
age-based limitation. The applicable percentage is a percentage that is 
calculated by dividing (i) the number of months during the period that 
begins with the month after the month in which the suspension is 
effective and ends with the month in which that participant or 
beneficiary attains the age of 80 by (ii) 60 months.
    Section 432(e)(9)(D) also requires the aggregate benefit 
suspensions (considered, if applicable, in connection with a partition) 
to be reasonably estimated to achieve, but not materially exceed, the 
level that is needed to avoid insolvency.
    Under the statute, any suspension of benefits must be equitably 
distributed across the participant and beneficiary population, taking 
into account factors that may include one or more of a list of 11 
statutory factors.\5\ Finally, with regard to a suspension of benefits 
that is made in combination with a partition, section 432(e)(9)(D)(v) 
provides that the suspension may not occur before the effective date of 
the partition.
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    \5\ These 11 factors are age and life expectancy; length of time 
in pay status; amount of benefit; type of benefit; extent of a 
subsidized benefit; extent of post-retirement benefit increases; 
history of benefit increases and reductions; years to retirement for 
active employees; any discrepancies between active and retiree 
benefits; extent to which participants are reasonably likely to 
withdraw support for the plan, resulting in accelerated employer 
withdrawal; and the extent to which the benefits are attributed to 
service with an employer that failed to pay its withdrawal 
liability.
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Benefit Improvements

    Section 432(e)(9)(E) sets forth rules relating to benefit 
improvements made while a suspension of benefits is in effect. Under 
this provision, a benefit improvement is defined as a resumption of 
suspended benefits, an increase in benefits, an increase in the rate at 
which benefits accrue, or an increase in the rate at which benefits 
become nonforfeitable under the plan.

[[Page 35210]]

    The statute also provides that, while a suspension of benefits is 
in effect, a plan sponsor generally has discretion to provide benefit 
improvements. However, a sponsor may not increase plan liabilities by 
reason of any benefit improvement for any participant or beneficiary 
who is not in pay status (in other words, those who are not yet 
receiving benefits, such as active employees or deferred vested 
employees) unless (1) this benefit improvement is accompanied by an 
equitable distribution of benefit improvements for those who have begun 
to receive benefits (typically, retirees), and (2) the plan actuary 
certifies that, after taking those benefit improvements into account, 
the plan is projected to avoid insolvency indefinitely.\6\ Whether an 
individual is in pay status for this purpose is generally based on 
whether the individual's benefits began before the first day of the 
plan year for which the benefit improvement took effect.
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    \6\ Avoidance of insolvency is determined by reference to 
section 418E under which a plan is insolvent if it is unable to pay 
scheduled benefits for a year. Pursuant to section 432(e)(9)(E)(iv), 
this restriction does not apply to certain benefit improvements if 
the Treasury Department determines either that the benefit 
improvements are reasonable and provide for only de minimis 
increases in plan liabilities or that the benefit improvements are 
required as a condition of qualification or to comply with other 
applicable law.
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Notice of Proposed Suspension

    A plan sponsor may not suspend benefits unless notice is provided 
in accordance with section 432(e)(9)(F). Under this section, 
concurrently with an application to suspend benefits under section 
432(e)(9)(G), the plan sponsor must give notice to plan participants 
and beneficiaries who may be contacted by reasonable efforts, each 
employer that has an obligation to contribute (within the meaning of 
section 4212(a) of ERISA) under the plan, and each employee 
organization that represents plan participants employed by those 
employers for purposes of collective bargaining. The notice must 
contain sufficient information to enable individuals to understand the 
effect of any suspension of benefits, including an individualized 
estimate, on an annual or monthly basis, of the effect on each 
participant or beneficiary. The notice must also contain certain other 
specified information.\7\ Notice must be provided in a form and manner 
prescribed in agency guidance, written in a manner so as to be 
understood by the average plan participant, and provided in written, 
electronic, or other appropriate form to the extent it is reasonably 
accessible to those to whom notice must be furnished.
---------------------------------------------------------------------------

    \7\ The specified information includes a description of the 
factors considered by the plan sponsor in designing the benefit 
suspension; a statement that the application for suspension of 
benefits will be available on the Web site of the Department of the 
Treasury and that comments on the application will be accepted; 
information on the rights and remedies of plan participants and 
beneficiaries; if applicable, a statement about the appointment of a 
retiree representative, the date of appointment of the retiree 
representative, identifying information about the retiree 
representative (including whether the representative is a plan 
trustee) and how to contact the representative; and information on 
how to contact the Department of the Treasury for more information 
and assistance where appropriate.
---------------------------------------------------------------------------

    Any notice provided under section 432(e)(9)(F)(i) will satisfy the 
requirement for notice of a significant reduction in benefits described 
in section 4980F. See section 432(e)(9)(F)(iv).

Suspension Applications

    Section 432(e)(9)(G) describes the process for approval or 
rejection of a plan sponsor's application for a suspension of benefits. 
Under the statute, the Treasury Department, in consultation with the 
PBGC and the Labor Department, must approve an application upon finding 
that the plan is eligible for the suspensions and has satisfied the 
criteria of sections 432(e)(9)(C), (D), (E), and (F) (each described 
earlier). In evaluating whether a plan sponsor has met the criteria in 
section 432(e)(9)(C)(ii) (a plan sponsor's determination that, although 
all reasonable measures have been taken, the plan will become insolvent 
if benefits are not suspended), the plan sponsor's consideration of 
factors under that clause must be reviewed. The statute also requires 
that the plan sponsor's determinations in an application for a 
suspension of benefits be accepted unless they are clearly erroneous.
    Section 432(e)(9)(G) also requires an application for a suspension 
of benefits to be published on the Web site of the Department of the 
Treasury and requires the Treasury Department to publish a Federal 
Register notice within 30 days of receiving a suspension application, 
soliciting comments from contributing employers, employee 
organizations, and participants and beneficiaries of the plan for which 
a suspension application was made, as well as other interested parties.
    Within 225 days after an application for a suspension of benefits 
is submitted, the statute requires the Treasury Department, in 
consultation with the PBGC and the Labor Department, to approve or deny 
the application. If the plan sponsor is not notified that it has failed 
to satisfy one or more applicable criteria within that 225-day period, 
the application is deemed approved. If the application is denied, a 
notice to the plan sponsor must detail the specific reasons for the 
rejection, including reference to the specific requirement not 
satisfied. Approval or denial of an application is treated as final 
agency action for purposes of 5 U.S.C. 704 (that is, the approval or 
denial is treated as final agency action for purposes of the 
Administrative Procedure Act, Public Law 79-404, 60 Stat. 237, as 
amended (APA)).

Participant Vote on Proposed Benefit Reduction

    If a suspension application is approved, it then goes to a vote of 
plan participants and beneficiaries. See section 432(e)(9)(H). The vote 
will be administered by the Treasury Department, in consultation with 
the PBGC and the Labor Department, within 30 days after approval of the 
suspension application. The plan sponsor is required to provide a 
ballot for a vote (subject to approval by the Treasury Department, in 
consultation with the PBGC and the Labor Department). The statute 
specifies information that the ballot must include.\8\ If a majority of 
plan participants and beneficiaries do not vote to reject the 
suspension, the statute requires the Treasury Department to issue a 
final authorization to suspend benefits within seven days after the 
vote.
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    \8\ This information includes a statement from the plan sponsor 
in support of the suspension; a statement in opposition to the 
suspension compiled from comments received in response to the 
Federal Register notice issued by Treasury within 30 days of 
receiving the suspension application; a statement that the 
suspension has been approved by the Secretary of the Treasury, in 
consultation with the PBGC and the Secretary of Labor; a statement 
that the plan sponsor has determined that the plan will become 
insolvent unless the suspension takes effect; a statement that 
insolvency of the plan could result in benefits lower than benefits 
paid under the suspension; and a statement that insolvency of the 
PBGC would result in benefits lower than benefits otherwise paid in 
the case of plan insolvency.
---------------------------------------------------------------------------

    If a majority of plan participants and beneficiaries vote to reject 
the suspension, the statute requires the Treasury Department, in 
consultation with the PBGC and the Labor Department, to determine 
whether the plan is a systemically important plan. A systemically 
important plan is a plan for which the PBGC projects the present value 
of projected financial assistance payments to exceed $1.0 billion, as 
indexed, if suspensions are not implemented.
    If a majority of plan participants and beneficiaries vote to reject 
the

[[Page 35211]]

suspension and the plan is not a systemically important plan, a final 
authorization to suspend benefits will not be issued. In such a case, 
the statute provides that the plan sponsor may submit a new application 
for approval of a suspension of benefits to the Treasury Department.
    Within 30 days after a plan is determined to be a systemically 
important plan, the Participant and Plan Sponsor Advocate selected 
under ERISA may submit recommendations to the Treasury Department with 
respect to the suspension that was rejected by the vote or 
recommendations for any revisions to that suspension. Notwithstanding 
the vote rejecting the suspension, the statute requires the Treasury 
Department, in consultation with the PBGC and the Labor Department, to 
permit the plan sponsor to implement either the proposed benefit 
suspension or a modification by the Treasury Department, in 
consultation with the PBGC and the Labor Department, of that 
suspension. The Treasury Department must complete this requirement 
within 90 days after the results of a vote rejecting a suspension for a 
systemically important plan are certified, and a modification of the 
suspension by the Treasury Department is only permitted if the plan is 
still projected to avoid insolvency under the modification.
    If the Treasury Department is required to permit the suspension or 
a modified suspension to go into effect in the case of a systemically 
important plan with respect to which there has been a vote rejecting 
the suspension, the statute requires the Treasury Department to issue 
the final authorization to suspend at a time sufficient to allow the 
suspension to be implemented by the end of the 90-day period following 
certification of the results of that vote.

Judicial Review

    Section 432(e)(9)(I)(i) allows a plan sponsor to challenge a denial 
of an application for suspension only after the application is denied. 
Under the statute, an action challenging the approval of a suspension 
may be brought only following the issuance of a final authorization to 
suspend. The statute also provides that a court will review an action 
challenging approval of a suspension of benefits in accordance with 5 
U.S.C. 706 (that is, the standard of review applicable for purposes of 
the APA) and will not grant a temporary injunction with respect to a 
suspension unless it finds a clear and convincing likelihood that the 
plaintiff will prevail on the merits. Under section 432(e)(9)(I)(iii), 
participants and beneficiaries affected by a suspension ``shall not 
have a cause of action under this title.'' An action challenging either 
the approval of a suspension of benefits or the denial of an 
application for a suspension of benefits may not be brought more than 
one year after the earliest date on which the plaintiff acquired or 
should have acquired actual knowledge of the existence of the cause of 
action. See section 432(e)(9)(I)(iv).

Explanation of Provisions

I. Overview

    These temporary regulations provide guidance on certain 
requirements under section 432(e)(9) regarding suspension of benefits 
for multiemployer defined benefit plans in critical and declining 
status. The temporary regulations do not address certain other 
requirements that are addressed in the text of the proposed regulations 
(REG-102648-15) set forth in the notice of proposed rulemaking on this 
subject in the Proposed Rules section of this issue of the Federal 
Register. The provisions of these temporary regulations are cross 
referenced in the proposed regulations so that comments on these 
provisions may be included with comments on the proposed regulations. 
In addition to the proposed and temporary regulations, the procedural 
requirements for submitting an application to suspend benefits, as well 
as a model notice, are set forth in Rev. Proc. 2015-34.

II. General Rules on Suspension of Benefits

    These temporary regulations provide that, subject to section 
432(e)(9)(B) through (I), the plan sponsor of a multiemployer plan that 
is in critical and declining status within the meaning of section 
432(b)(6) for a plan year may, by plan amendment, implement a 
suspension of benefits that the plan sponsor deems appropriate. Such a 
suspension is permitted notwithstanding the generally applicable anti-
cutback provisions of section 411(d)(6). The plan amendment 
implementing a suspension of benefits must be adopted in a plan year in 
which the plan is in critical and declining status.
    Under the regulations, once a plan is amended to suspend benefits, 
a plan may pay or continue to pay a reduced level of benefits pursuant 
to a suspension only if the terms of the plan are consistent with the 
requirements of section 432(e)(9) and the regulations.

III. Definitions

    The temporary regulations include definitions for the terms pay 
status and plan sponsor. A person is in pay status under a 
multiemployer plan if, as described in section 432(j)(6), at any time 
during the current plan year, the person is a participant, beneficiary, 
or alternate payee under the plan and is paid an early, late, normal, 
or disability retirement benefit under the plan (or a death benefit 
under the plan related to a retirement benefit).
    The term plan sponsor means the association, committee, joint board 
of trustees, or other similar group of representatives of the parties 
that establishes or maintains the multiemployer plan. However, in the 
case of a plan described in section 404(c), or a continuation of such a 
plan, the term plan sponsor means the association of employers that is 
the employer settlor of the plan.

IV. Definition of Suspension of Benefits and Related Rules

    The temporary regulations provide that the term suspension of 
benefits means the temporary or permanent reduction, pursuant to the 
terms of the plan, of any current or future payment obligation of the 
plan with respect to any participant under the plan. A suspension of 
benefits can apply with respect to a participant of the plan regardless 
of whether the participant, beneficiary, or alternate payee has 
commenced receiving benefits before the effective date of the 
suspension of benefits. If a plan pays a reduced level of benefits 
pursuant to a suspension of benefits that complies with the 
requirements of section 432(e)(9), then the plan is not liable for any 
benefits not paid as a result of the suspension.
    A suspension of benefits may be of indefinite duration or may 
expire as of a certain date. Under the regulations, if the suspension 
of benefits has an expiration date, that date must be specified in the 
plan amendment implementing the suspension.
    The temporary regulations provide that a plan sponsor may amend the 
plan to eliminate some or all of a suspension of benefits, provided 
that the amendment satisfies the requirements that apply to benefit 
improvements in the proposed rules under section 432(e)(9)(E).
    The temporary regulations clarify that, except as otherwise 
specified, all references to suspensions of benefits, increases in 
benefits, or resumptions of suspended benefits with respect to 
participants also apply with respect to benefits of beneficiaries or 
alternate payees (as defined in section 414(p)(8)) of participants.

V. Retiree Representative

    A retiree representative must be selected for a plan with 10,000 or 
more

[[Page 35212]]

participants. The temporary regulations implement this condition by 
requiring that a retiree representative be selected if 10,000 or more 
participants were reported on the most recently filed Form 5500, 
``Annual Return/Report of Employee Benefit Plan.'' \9\ The plan sponsor 
must select the retiree representative at least 60 days before the plan 
sponsor submits an application to suspend benefits. The retiree 
representative must be a plan participant who is in pay status and may 
or may not be a plan trustee.
---------------------------------------------------------------------------

    \9\ On the Form 5500 for the 2014 plan year, this is the total 
number of participants as of the end of the plan year that is 
reported on Part II, Line 6f.
---------------------------------------------------------------------------

    The role of the retiree representative is to advocate for the 
interests of the retired and deferred vested participants and 
beneficiaries of the plan throughout the suspension approval process. 
However, in the discretion of the plan sponsor, the retiree 
representative may continue in this role throughout the period of the 
benefit suspension. This would enable the retiree representative to 
monitor compliance with the ongoing requirements during the period of 
the suspension, such as the requirement that the plan sponsor make 
annual determinations that all reasonable measures to avoid insolvency 
have been taken and that a suspension is necessary to avoid insolvency 
as well as to monitor compliance with the rules relating to benefit 
improvements. The regulations refer to section 432(e)(9)(B)(v)(III) for 
rules relating to the fiduciary status of a retiree representative, but 
do not provide additional guidance with respect to this provision.
    The plan must pay reasonable expenses incurred by the retiree 
representative, including reasonable legal and actuarial support, 
commensurate with the plan's size and funded status. Upon request, the 
plan sponsor must promptly provide the retiree representative with 
relevant information, such as plan documents and data, that is 
reasonably necessary to enable the retiree representative to perform 
the representative's role, described earlier under this paragraph V.
    The temporary regulations permit a plan sponsor of a plan that has 
reported fewer than 10,000 participants to select a retiree 
representative in connection with an application for approval of a 
suspension of benefits in order to encourage such a plan sponsor to do 
so. If a retiree representative is selected for such a plan, the rules 
that apply to retiree representatives for plans with 10,000 or more 
participants (other than the rule concerning the size of the plan and 
the timing of the appointment) will apply.

VI. Conditions for Suspensions

    A plan sponsor of a plan in critical and declining status \10\ may 
suspend benefits only if the actuarial certification requirement in 
section 432(e)(9)(C)(i) and the plan-sponsor determinations 
requirements in section 432(e)(9)(C)(ii) are satisfied.
---------------------------------------------------------------------------

    \10\ In making the projections related to whether a plan is in 
critical and declining status, the plan actuary's projections are 
required to be based on reasonable actuarial assumptions. Rev. Proc. 
2015-34 requires disclosure of a 10-year history of certain critical 
assumptions for this purpose as well as for purposes of the 
conditions for suspensions required by section 432(e)(9)(C).
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A. Actuarial Certification

    Under the temporary regulations, the actuarial certification 
requirement in section 432(e)(9)(C)(i) is satisfied if, taking into 
account the proposed suspension of benefits (and, if applicable, a 
proposed partition of the plan), the plan's actuary certifies that the 
plan is projected to avoid insolvency within the meaning of section 
418E, assuming the suspension of benefits continues until it expires by 
its own terms or if no such expiration date is set, indefinitely. The 
temporary regulations do not provide guidance on this topic. However, 
the proposed regulations provide rules for the comparable requirement 
that the suspension (in combination with a partition, if applicable) be 
reasonably estimated to avoid insolvency under section 
432(e)(9)(D)(iv).

B. Plan-Sponsor Determinations

    A plan may not suspend benefits unless the plan sponsor makes 
initial and annual determinations that the plan is projected to become 
insolvent unless benefits are suspended, although all reasonable 
measures to avoid insolvency have been taken and continue to be taken.
    Under the temporary regulations, a plan satisfies the initial-plan-
sponsor determinations requirement only if the plan sponsor determines 
that (1) all reasonable measures to avoid insolvency, within the 
meaning of section 418E, have been taken, and (2) the plan is projected 
to become insolvent within the meaning of section 418E unless the 
proposed suspension of benefits (or another suspension of benefits 
under section 432(e)(9)) is implemented for the plan.
    In making its determination that all reasonable measures to avoid 
insolvency have been taken, the plan sponsor may take into account the 
non-exclusive list of factors set forth in section 432(e)(9)(C)(ii). In 
making the initial determination that the plan is projected to become 
insolvent without the proposed suspension of benefits (or another 
suspension under section 432(e)(9)), a plan sponsor may rely on the 
actuarial certification made pursuant to section 432(b)(3)(A)(i) that 
the plan is in critical and declining status for the plan year.
    The rules relating to the annual-plan-sponsor determinations are 
included in the proposed regulations.

VII. Limitations on Suspensions

    The proposed and temporary regulations reflect the individual and 
aggregate limitations on a suspension of benefits under section 
432(e)(9)(D).\11\ The temporary regulations provide that after applying 
the individual limitations, the overall size and distribution of the 
suspension is subject to the aggregate limitations.
---------------------------------------------------------------------------

    \11\ The temporary regulations refer to section 
432(e)(9)(D)(vii) for additional rules applicable to certain plans, 
but do not provide additional guidance with respect to this 
provision.
---------------------------------------------------------------------------

    The temporary regulations provide that the monthly benefit payable 
to a participant, beneficiary, or alternate payee may not be reduced 
below 110 percent of the monthly benefit that would be guaranteed by 
the PBGC under section 4022A of ERISA if the plan were to become 
insolvent as of the effective date of the suspension. The proposed 
regulations provide more detailed rules for applying this limitation.
    The temporary regulations reflect the statutory prohibition in 
section 432(e)(9)(D)(iii) on applying a suspension of benefits to 
benefits based on disability (as defined under the plan). The proposed 
regulations include more detailed rules for applying this limitation.
    The rules regarding the age-based limitation of section 
432(e)(9)(D)(ii) and the aggregate limitations of section 
432(e)(9)(D)(iv) and (vi) are set forth in the proposed regulations.
    In any case in which a suspension of benefits with respect to a 
plan is made in combination with a partition of the plan, the 
suspension of benefits may not take effect prior to the effective date 
of the partition. This requirement will not be satisfied if the 
partition order under section 4233 of ERISA has not been provided to 
the Treasury Department by the last day of the 225-day review period 
described in section 432(e)(9)(G)(iii), after which deemed approval of 
the suspension would occur.

[[Page 35213]]

VIII. Benefit Improvements

    The rules regarding restrictions on benefit improvements are set 
forth in the proposed regulations.

IX. Notice of Proposed Suspension

    The temporary regulations prescribe rules implementing the 
statutory notice requirements in section 432(e)(9)(F).
    Specifically, the temporary regulations require the plan sponsor to 
provide notice of a proposed suspension to all plan participants, 
beneficiaries of deceased participants, and alternate payees 
(regardless of whether their benefits are proposed to be suspended) 
except those who cannot be contacted by reasonable efforts; each 
employer that has an obligation to contribute (within the meaning of 
section 4212(a) of ERISA) under the plan; and each employee 
organization which, for purposes of collective bargaining, represents 
plan participants employed by such an employer. The temporary 
regulations provide two examples illustrating what efforts constitute 
reasonable efforts to contact individuals for purposes of this notice 
requirement. These examples indicate that it is not sufficient to 
merely send notices to the individuals' last known mailing addresses 
and illustrate additional steps that may be used to satisfy these 
requirements if the plan sponsor becomes aware that some individuals 
did not receive notice.
    The temporary regulations require the notice to contain the 
following in order to satisfy the requirement that the notice contain 
sufficient information to enable plan participants and beneficiaries to 
understand the effect of the suspension of benefits:
     An individualized estimate, on an annual or monthly basis, 
of the effect of the suspension on the participant or beneficiary. 
However, if it is not possible to provide an individualized estimate on 
an annual or monthly basis of the quantitative effect of the suspension 
on the participant or beneficiary, such as in the case of a suspension 
that affects the payment of any future cost-of-living adjustment, a 
narrative description of the effect of the suspension;
     A statement that the plan sponsor has determined that the 
plan will become insolvent unless the proposed suspension (and, if 
applicable, the proposed partition) takes effect, and the year in which 
insolvency is projected to occur without a suspension of benefits (and, 
if applicable, a proposed partition);
     A statement that insolvency of the plan could result in 
benefits lower than benefits paid under the proposed suspension and a 
description of the projected benefit payments upon insolvency;
     A description of the proposed suspension and its effect, 
including a description of the different categories or groups affected 
by the suspension, how those categories or groups are defined, and the 
formula that is used to calculate the amount of the proposed suspension 
for individuals in each category or group;
     A description of the effect of the proposed suspension on 
the plan's projected insolvency;
     A description of whether the suspension will remain in 
effect indefinitely or will expire by its own terms; and
     A statement describing the right to vote on the suspension 
application.
    The notice of proposed suspension may not include false or 
misleading information (or omit information so as to cause the 
information provided to be misleading). The notice is permitted to 
include information in addition to the required information that is 
listed under this paragraph IX., including information relating to an 
application for partition under section 4233 of ERISA, provided that it 
satisfies these requirements.
    The notice of proposed suspension must be written in a manner that 
can be readily understood by the average plan participant. The 
temporary regulations provide that the Treasury Department will provide 
a model notice. The use of the model notice will satisfy the content 
requirement and the readability requirement with respect to the 
language provided in the model.
    The temporary regulations provide that notice may be provided in 
writing or in electronic form to the extent that the electronic form is 
reasonably accessible to persons to whom the notice is required to be 
provided. Permissible electronic methods include those permitted under 
regulations of the Department of Labor at 29 CFR 2520.104b-1(c) and 
those described at Sec.  54.4980F-1, Q&A-13(c) of the Excise Tax 
Regulations.
    Section 432(e)(9)(F) provides that the notice of proposed 
suspension must be given ``concurrently'' with the submission of an 
application to the Treasury Department, but does not specify a precise 
timeframe for satisfying this requirement. Interpreting 
``concurrently'' as meaning either simultaneously or on the same day 
was rejected because it would require the difficult synchronization of 
the plan sponsor's electronic submission of its application and its 
giving of notice in written and/or in electronic form. Because the 
temporary regulations require a plan sponsor to submit its application 
electronically but authorize it to give notice in writing, interpreting 
the term ``concurrently'' to allow a plan sponsor to give written 
notice a few days earlier than the electronic submission of the 
application will allow for the receipt of such written notices on or 
about the time that a plan sponsor submits its application. The 
temporary regulations thus permit a plan sponsor to give notice no 
earlier than four business days before the submission of its 
application.
    The temporary regulations also anticipate that a plan sponsor is 
permitted to give written notice no later than four business days after 
the submission of its application. This period of time will enable the 
Department of the Treasury to make a preliminary ``completeness check'' 
of the application during the first two business days, and the plan 
sponsor two business days thereafter to give the required notices.\12\ 
This approach will help participants by minimizing the risk of 
confusion and plan expense. For example, if a plan sponsor submits an 
incomplete application, compiles the additional information, and then 
finds the individualized estimates that the plan sponsor already gave 
to be inaccurate (or simply takes too long to compile the additional 
information), the plan sponsor would have to re-send the notices, 
increasing the likelihood that the notice would not be understood by 
the average plan participant as a result of receiving two different 
notices, each with a different individualized estimate. Although the 
temporary regulations allow plan sponsors to give participants notice 
when or before the application is submitted, sponsors are encouraged to 
delay giving notice until after the Department of the Treasury provides 
notification that the application is complete. If additional 
individuals who are entitled to notice are located after the time 
notice is required to be delivered, the plan sponsor must give those 
newly located individuals notice as soon as practicable after they are 
located.
---------------------------------------------------------------------------

    \12\ The completeness check is described under paragraph X. in 
this preamble (``Approval or denial of an application for suspension 
of benefits'').
---------------------------------------------------------------------------

    The temporary regulations further provide that a notice of proposed 
suspension satisfies the requirement for notice of a significant 
reduction in benefits described in section 4980F that would otherwise 
be required as a result of that suspension of benefits. To the extent 
that other reductions accompany

[[Page 35214]]

a suspension of benefits, such as a reduction in the future accrual 
rate described in section 4980F for active participants or a reduction 
in adjustable benefits under section 432(e)(8), notice that satisfies 
the requirements (including the applicable timing requirements) of 
section 4980F or section 432(e)(8), as applicable, must be provided.

X. Approval or Denial of an Application for Suspension of Benefits

    The temporary regulations provide that the plan sponsor of a plan 
in critical and declining status for a plan year that seeks to suspend 
benefits must submit an application for approval of the proposed 
suspension of benefits to the Treasury Department. The Treasury 
Department will approve, in consultation with the PBGC and the Labor 
Department, a complete application upon finding that the plan is 
eligible for the suspension and has satisfied the criteria of section 
432(e)(9)(C), (D), (E), and (F). An application must be submitted 
electronically.
    After receiving a submission, the plan sponsor will be notified 
within two business days whether the submission constitutes a complete 
application. If the submission is a complete application, the 
application will be treated as submitted on the date on which it was 
originally submitted to the Treasury Department. If a submission is 
incomplete, the notification will inform the plan sponsor of the 
information that is needed to complete the submission and give the plan 
sponsor a reasonable opportunity to submit a complete application. In 
such a case, the complete application will be treated as submitted on 
the date on which the additional information needed to complete the 
application is submitted to the Treasury Department.
    Additional guidance that may be necessary or appropriate with 
respect to applications, including procedures for submitting 
applications and the information required to be included in a complete 
application, may be published in the form of revenue procedures, 
notices, or other guidance published in the Internal Revenue Bulletin.
    In the case of a plan sponsor that is not submitting an application 
for suspension in combination with an application to PBGC for a plan 
partition, the temporary regulations provide that the application for 
suspension generally will not be accepted unless the proposed effective 
date of the suspension is at least nine months after the date on which 
the application is submitted. This is to ensure adequate time to review 
the proposed suspension without a need to delay the effective date of 
the proposed suspension. A delayed effective date could require other 
changes to the design of the suspension. For example, if, as a result 
of a delayed effective date, the age-based limitation under section 
432(e)(9)(D)(ii) applies to more participants than under the terms of 
the proposed suspension, then benefits of other participants may be 
subject to greater reductions in order to satisfy the limitation in 
section 432(e)(9)(D)(iv) that the suspension, in the aggregate, must be 
reasonably estimated to achieve, but not materially exceed, the level 
necessary to avoid insolvency. However, in appropriate circumstances, 
an earlier effective date may be permitted. Appropriate circumstances 
could include an application for a proposed suspension that is a 
modification of a previous submission that was withdrawn or denied.
    In the case of an application for suspension in combination with an 
application for partition, the impact of a delayed effective date for 
the suspension would be larger benefits for retirees rather than a 
redesign of the suspension. Accordingly, these temporary regulations do 
not apply the rule described in the preceding paragraph to such an 
application. See Part 4233 of the PBGC regulations for a coordinated 
application process that applies in the case of a plan sponsor that is 
submitting an application for suspension in combination with an 
application to PBGC for a plan partition under section 4233 of ERISA.
    The temporary regulations provide that, no later than 30 days after 
receiving a complete application, the application will be published on 
the Web site of the Department of the Treasury, and the Treasury 
Department will publish a notice in the Federal Register soliciting 
comments from contributing employers, employee organizations, and 
participants and beneficiaries of the plan for which an application was 
made, and other interested parties. The notice soliciting comments will 
generally request that comments be submitted no later than 45 days 
after publication of that notice in the Federal Register, but the 
comment period may be shorter in appropriate circumstances. Appropriate 
circumstances could include an application for a proposed suspension 
that is a modification of a previous submission that was withdrawn or 
denied. Comments received in response to this notice will be made 
publicly available.
    Under the temporary regulations, a complete application will be 
deemed approved unless, within 225 days after the complete application 
is submitted, the Treasury Department notifies the plan sponsor that 
its application does not satisfy one or more of the requirements for 
approval. If the Treasury Department denies a plan sponsor's 
application, the notification of the denial will detail the specific 
reasons for the denial, including reference to the specific requirement 
or requirements not satisfied. If the Treasury Department approves a 
plan sponsor's application and believes that the plan is a systemically 
important plan, then the Treasury Department will notify the plan 
sponsor of that belief and that it will be required to provide 
individual participant data upon request. This data may be used in the 
event of a vote to reject the suspension in order to assist the 
Treasury Department in determining whether to permit a modification of 
the rejected suspension.
    The temporary regulations provide that the Secretary of the 
Treasury may appoint a Special Master for purposes of section 
432(e)(9). If a Special Master is appointed, the Special Master will be 
an employee of the Department of the Treasury, will coordinate the 
implementation of the regulations and the review of applications for 
the suspension of benefits and other appropriate documents, and will 
provide recommendations to the Secretary of the Treasury with respect 
to decisions required under these regulations.
    Certain rules relating to the Treasury Department's review of an 
application under section 432(e)(9)(G) are included in the proposed 
regulations.

XI. Participant Vote on Proposed Benefit Reduction

    The temporary regulations provide that if an application for 
suspension is approved by the Treasury Department, then the Treasury 
Department, in consultation with the PBGC and the Labor Department, 
will administer a vote of all plan participants and all beneficiaries 
of deceased participants (eligible voters). Any suspension of benefits 
will take effect only after the vote and after a final authorization to 
suspend benefits.
    Under the temporary regulations, any ballot provided by the plan 
sponsor in connection with a vote on the suspension must be approved by 
the Treasury Department, in consultation with the PBGC and the Labor 
Department. The ballot must be written in a manner that can be readily

[[Page 35215]]

understood by the average plan participant and may not include any 
false or misleading information. The information that is required to be 
included in the ballot is described in the proposed regulations.
    The temporary regulations provide that unless a majority of all 
eligible voters vote to reject the suspension, it is permitted to go 
into effect. If a majority of all eligible voters vote to reject the 
suspension, the suspension is not permitted to go into effect, except 
that the suspension or a modified suspension will be permitted to go 
into effect if the plan is a systemically important plan as described 
later under this paragraph XI. A plan sponsor is permitted to submit a 
new suspension application to the Treasury Department for approval in 
any case in which a suspension is prohibited from taking effect as a 
result of a vote.
    The temporary regulations set forth rules for systemically 
important plans. If a majority of all eligible voters vote to reject 
the suspension, the Treasury Department will consult with the PBGC and 
the Labor Department to determine if the plan is a systemically 
important plan. The Treasury Department is required to make this 
determination no later than 14 days after the results of the vote are 
certified. No later than 30 days after a determination that the plan is 
a systemically important plan, the Participant and Plan Sponsor 
Advocate selected under section 4004 of ERISA may submit 
recommendations to the Treasury Department with respect to the 
suspension or any revisions to the suspension.
    If a plan is a systemically important plan for which a majority of 
all eligible voters vote to reject the suspension, then the Treasury 
Department is required to either permit the implementation of the 
suspension that was rejected by the vote or permit the implementation 
of a modification of that suspension. Under any such modification, the 
plan must be projected to avoid insolvency in accordance with section 
432(e)(9)(D)(iv). No later than 60 days after the results of a vote to 
reject a suspension are certified, the Treasury Department will notify 
the plan sponsor that the suspension or modified suspension is 
permitted to be implemented.
    The temporary regulations define a systemically important plan as a 
plan with respect to which the PBGC projects that the present value of 
financial assistance payments will exceed $1.0 billion if the 
suspension is not implemented. For calendar years beginning after 2015, 
this dollar amount will be replaced by an amount equal to the product 
of the dollar amount and a fraction, the numerator of which is the 
contribution and benefit base (determined under section 230 of the 
Social Security Act) for the preceding calendar year and the 
denominator of which is the contribution and benefit base for calendar 
year 2014. If that amount is not a multiple of $1.0 million, it will be 
rounded to the next lowest multiple of $1.0 million.
    The temporary regulations provide that, in any case in which a 
proposed suspension (or a modification of a proposed suspension) is 
permitted to go into effect, the Treasury Department, in consultation 
with the PBGC and the Labor Department, will issue a final 
authorization to suspend with respect to the suspension. If a 
suspension is permitted to go into effect following a vote, the final 
authorization will be issued no later than seven days after the vote. 
If a suspension is permitted to go into effect following a 
determination that the plan is a systemically important plan, the final 
authorization will be issued at a time sufficient to allow the 
implementation of the suspension prior to the end of the 90-day period 
beginning on the date the results of the vote rejecting the suspension 
are certified. Under the temporary regulations, no later than 60 days 
after the certification, the Treasury Department will notify the plan 
sponsor that the suspension that was rejected by the vote or a modified 
suspension is permitted to be implemented.
    The temporary regulations provide that, in any case in which a 
suspension of benefits with respect to a plan is made in combination 
with a partition of the plan under section 4233 of ERISA, the 
suspension of benefits is not permitted to take effect prior to the 
effective date of the partition.

Effective/Applicability Date

    These regulations apply on and after June 17, 2015 and expire on 
June 15, 2018.

Availability of IRS Documents

    For copies of recently issued revenue procedures, revenue rulings, 
notices and other guidance published in the Internal Revenue Bulletin, 
please visit the IRS Web site at http://www.irs.gov or contact the 
Superintendent of Documents, U.S. Government Printing Office, 
Washington, DC 20402.

Special Analyses

    Certain IRS regulations, including this one, are exempt from the 
requirements of Executive Order 12866, as supplemented and reaffirmed 
by Executive Order 13563. Therefore, a regulatory impact assessment is 
not required. It also has been determined that section 553(b) of the 
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to 
these regulations. For the applicability of the Regulatory Flexibility 
Act (5 U.S.C. chapter 6) please refer to the Special Analyses section 
of the preamble to the cross-referenced notice of proposed rulemaking 
published in the Proposed Rules section in this issue of the Federal 
Register. Pursuant to section 7805(f) of the Code, these regulations 
have been submitted to the Chief Counsel for Advocacy of the Small 
Business Administration for comment on their impact on small business.

Contact Information

    For general questions regarding these regulations, please contact 
the Department of the Treasury at (202) 622-1559 (not a toll-free 
number). For information regarding a specific application for a 
suspension of benefits, please contact the Department of the Treasury 
at (202) 622-1534 (not a toll-free number).

List of Subjects

26 CFR Part 1

    Income taxes, reporting and recordkeeping requirements.

26 CFR Part 602

    Reporting and recordkeeping requirements.

Amendments to the Regulations

    Accordingly, 26 CFR parts 1 and 602 are amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority:  26 U.S.C. 78