Additional Limitation on Suspension of Benefits Applicable to Certain Pension Plans Under the Multiemployer Pension Reform Act of 2014, 27011-27015 [2016-10560]

Download as PDF Federal Register / Vol. 81, No. 87 / Thursday, May 5, 2016 / Rules and Regulations end of the fishing year during which the tests were performed. All scale test report forms must be signed by the operator. * * * * * ■ 5. In § 660.150, revise paragraphs (b)(1)(ii) introductory text and (b)(1)(ii)(A) and (C) to read as follows: § 660.150 Mothership (MS) Coop Program. * * * * (b) * * * (1) * * * (ii) Mothership vessel responsibilities. The owner and operator of a mothership vessel must: (A) Recordkeeping and reporting. Maintain a valid declaration as specified at § 660.13(d); maintain records as specified at § 660.113(a); and maintain and submit all records and reports specified at § 660.113(c) including, economic data, scale tests records, cease fishing reports, and cost recovery. * * * * * (C) Catch weighing requirements. The owner and operator of a mothership vessel must: (1) Ensure that all catch is weighed in its round form on a NMFS-approved scale that meets the requirements described in section § 660.15(b); (2) Provide a NMFS-approved platform scale, belt scale, and test weights that meet the requirements described in section § 660.15(b). * * * * * ■ 6. In § 660.160, revise paragraphs (b)(1)(ii) introductory text and (b)(1)(ii)(A) and (C) to read as follows: weights that meet the requirements described in § 660.15(b). * * * * * [FR Doc. 2016–10476 Filed 5–4–16; 8:45 am] BILLING CODE 3510–22–P DEPARTMENT OF THE TREASURY Internal Revenue Service * § 660.160 Catcher/processor (C/P) Coop Program. ehiers on DSK5VPTVN1PROD with RULES * * * * * (b) * * * (1) * * * (ii) Catcher/processor vessel responsibilities. The owner and operator of a catcher/processor vessel must: (A) Recordkeeping and reporting. Maintain a valid declaration as specified at § 660.13(d); maintain records as specified at § 660.113(a); and maintain and submit all records and reports specified at § 660.113(d) including, economic data, scale tests records, cease fishing reports, and cost recovery. * * * * * (C) Catch weighing requirements. The owner and operator of a catcher/ processor vessel must: (1) Ensure that all catch is weighed in its round form on a NMFS-approved scale that meets the requirements described in § 660.15(b); (2) Provide a NMFS-approved platform scale, belt scale, and test VerDate Sep<11>2014 13:35 May 04, 2016 Jkt 238001 26 CFR Part 1 [TD 9767] Additional Limitation on Suspension of Benefits Applicable to Certain Pension Plans Under the Multiemployer Pension Reform Act of 2014 Internal Revenue Service (IRS), Treasury. ACTION: Final regulations. AGENCY: The Multiemployer Pension Reform Act of 2014 (‘‘MPRA’’), which was enacted by Congress as part of the Consolidated and Further Continuing Appropriations Act of 2015, relates to multiemployer defined benefit pension plans that are projected to have insufficient funds, within a specified timeframe, to pay the full plan benefits to which individuals will be entitled (referred to as plans in ‘‘critical and declining status’’). Under MPRA, the sponsor of such a plan is permitted to reduce the pension benefits payable to plan participants and beneficiaries if certain conditions and limitations are satisfied (referred to in MPRA as a ‘‘suspension of benefits’’). One specific limitation governs the application of a suspension of benefits under any plan that includes benefits directly attributable to a participant’s service with any employer that has withdrawn from the plan in a complete withdrawal, paid its full withdrawal liability, and, pursuant to a collective bargaining agreement, assumed liability for providing benefits to participants and beneficiaries equal to any benefits for such participants and beneficiaries reduced as a result of the financial status of the plan. This document contains final regulations that provide guidance relating to this specific limitation. These regulations affect active, retired, and deferred vested participants and beneficiaries under any such multiemployer plan in critical and declining status as well as employers contributing to, and sponsors and administrators of, those plans. DATES: Effective date: These regulations are effective on May 5, 2016. SUMMARY: Frm 00015 Fmt 4700 Applicability date: These regulations apply to suspensions for which the approval or denial is issued on or after April 26, 2016. In the case of a systemically important plan, the final regulations apply with respect to any modified suspension implemented on or after April 26, 2016. FOR FURTHER INFORMATION CONTACT: The Department of the Treasury MPRA guidance information line at (202) 622– 1559 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background RIN 1545–BN24 PO 00000 27011 Sfmt 4700 This document contains amendments to the Income Tax Regulations (26 CFR part 1) under section 432(e)(9) of the Internal Revenue Code (Code), as amended by section 201 of 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).1 As amended, section 432(e)(9) permits plan sponsors of certain multiemployer plans to reduce the plan benefits payable to participants and beneficiaries by plan amendment (referred to in the statute as a ‘‘suspension of benefits’’) if specified conditions are satisfied. A plan sponsor that seeks to implement a suspension of benefits must submit an application for approval of that suspension to the Secretary of the Treasury. 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), is required by the statute to approve the application upon finding that certain specified conditions are satisfied. One condition, set forth in section 432(e)(9)(D)(vii), is a specific limitation on how a suspension of benefits must be applied under a plan that includes benefits that are directly attributable to a participant’s service with any employer described in section 432(e)(9)(D)(vii)(III). An employer is described in section 432(e)(9)(D)(vii)(III) if the employer has, prior to the date MPRA was enacted (December 16, 2014): (1) Withdrawn from the plan in a complete withdrawal under section 1 Section 201 of MPRA makes parallel amendments to section 305 of the Employee Retirement Income Security Act of 1974, Public Law 93–406 (88 Stat. 829 (1974)), as amended (ERISA). The Treasury Department 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). Thus, these final Treasury regulations issued under section 432 of the Code apply as well for purposes of section 305 of ERISA. E:\FR\FM\05MYR1.SGM 05MYR1 ehiers on DSK5VPTVN1PROD with RULES 27012 Federal Register / Vol. 81, No. 87 / Thursday, May 5, 2016 / Rules and Regulations 4203 of ERISA; (2) paid the full amount of the employer’s withdrawal liability under section 4201(b)(1) of ERISA or an agreement with the plan; and (3) pursuant to a collective bargaining agreement, assumed liability for providing benefits to participants and beneficiaries of the plan under a separate, single-employer plan sponsored by the employer, in an amount equal to any amount of benefits for these participants and beneficiaries reduced as a result of the financial status of the plan. Such an employer is referred to in this preamble as a ‘‘subclause III employer,’’ and a collective bargaining agreement under which the employer assumes liability for those benefits is referred to as a ‘‘make-whole agreement.’’ If section 432(e)(9)(D)(vii) applies to a plan then, under section 432(e)(9)(D)(vii)(I), the suspension of benefits must first be applied to the maximum extent permissible to benefits attributable to a participant’s service with an employer that withdrew from the plan and failed to pay (or is delinquent with respect to paying) the full amount of its withdrawal liability under section 4201(b)(1) of ERISA or an agreement with the plan. Such an employer is referred to in this preamble as a ‘‘subclause I employer.’’ Second, under section 432(e)(9)(D)(vii)(II), except as provided in section 432(e)(9)(D)(vii)(III), a suspension of benefits must be applied to all other benefits under the plan that may be suspended. Third, under section 432(e)(9)(D)(vii)(III), a suspension must be applied to benefits under the plan that are directly attributable to a participant’s service with a subclause III employer. An employer under the plan is referred to in this preamble as a ‘‘subclause II employer’’ if it is neither a subclause I employer nor a subclause III employer. On October 23, 2015, the Treasury Department published a notice in the Federal Register (80 FR 64508) regarding an application for a proposed suspension of benefits, which represented that the plan is of the type to which section 432(e)(9)(D)(vii) applies. The notice requested public comments on all aspects of the application, including with respect to the interpretation of section 432(e)(9)(D)(vii) that is reflected in the application. On February 11, 2016, the Treasury Department and the IRS published proposed regulations (REG–101701–16) regarding the specific limitation on a suspension of benefits under section 432(e)(9)(D)(vii) in the Federal Register at 81 FR 7253. Comments were received VerDate Sep<11>2014 13:35 May 04, 2016 Jkt 238001 on the proposed regulations and a public hearing was held on March 22, 2016. After consideration of the written comments received and the oral comments presented at the public hearing, the provisions of the proposed regulations are adopted as revised by this Treasury decision. The Treasury Department consulted with PBGC and the Labor Department in developing these regulations.2 Explanation of Provisions These regulations amend the Income Tax Regulations (26 CFR part 1) to provide guidance regarding section 432(e)(9)(D)(vii). Section 432(e)(9)(D)(vii) sets forth a rule that limits how a suspension may be applied under a plan that includes benefits that are directly attributable to a participant’s service with a subclause III employer. In determining how a suspension should be allocated consistent with MPRA’s framework and purpose, the Treasury Department and the IRS analyzed the statute and applied well-established principles of statutory construction to interpret section 432(e)(9)(D)(vii). In so doing, the Treasury Department and the IRS interpreted section 432(e)(9)(D)(vii) in the context of section 432(e)(9) as a whole, which requires, among other things, that any suspension be subject to certain limitations, including that the suspension be equitably distributed across the participant and beneficiary population. I. Application of a Suspension of Benefits to Subclause I Benefits to the Maximum Extent Permissible Subclause (I) of section 432(e)(9)(D)(vii) provides that the suspension of benefits must first be applied ‘‘to the maximum extent permissible’’ to benefits attributable to service with a subclause I employer (referred to in this preamble as ‘‘subclause I benefits’’). Accordingly, the proposed regulations provided that, for a plan that is subject to section 432(e)(9)(D)(vii), a suspension of benefits must be applied to the maximum extent permissible to subclause I benefits before reductions are permitted to be applied to any other benefits. Under the proposed regulations, only if such a suspension is not reasonably estimated to achieve the level that is necessary to enable the plan 2 The Treasury Department and the IRS have published final regulations providing general guidance regarding section 432(e)(9). See § 1.432(e)(9)–1 (TD 9765), published in the Federal Register on April 28, 2016 (81 FR 25539). . PO 00000 Frm 00016 Fmt 4700 Sfmt 4700 to avoid insolvency may a suspension then be applied to other benefits that are permitted to be suspended and that are attributable to a participant’s service with other employers. No commenters objected to this provision of the proposed regulations, and these final regulations adopt this provision as proposed. II. Relationship Between Subclause II Benefits and Subclause III Benefits In contrast to subclause (I) of section 432(e)(9)(D)(vii), subclause (II) does not include the phrase ‘‘to the maximum extent permissible.’’ Accordingly, the Treasury Department and the IRS developed the rules in the proposed regulations based on the interpretation that a suspension need not be applied to the maximum extent permissible to benefits described in subclause (II) before any suspension is applied to benefits described in subclause (III). A number of commenters expressed views regarding the rules under the proposed regulations describing how the suspension of benefits is permitted to apply to benefits attributable to service with a subclause II employer (referred to in this preamble as ‘‘subclause II benefits’’) and benefits directly attributable to service with a subclause III employer (referred to in this preamble as ‘‘subclause III benefits’’). Many of these commenters agreed with the analysis set forth in the preamble to the proposed regulations and supported an interpretation of the statute that subclause II benefits are not required to be reduced to the maximum extent permissible before any subclause III benefits can be reduced. Two commenters advocated that the statute be interpreted to require that subclause II benefits be suspended to the maximum extent permissible before a suspension is permitted to apply to any subclause III benefits. These commenters maintained that this result is required by the ordinal numbering of the three subclauses and asserted that Congress intended to favor any withdrawing employer that not only paid the full amount of its withdrawal liability but also entered into a makewhole agreement. If such an approach were applied under section 432(e)(9)(D)(vii), then the benefits described in each of the first two subclauses would be required to be suspended to the maximum extent permissible before any suspension could apply to benefits described in the successive subclause. Under that approach, subclause III benefits would be permitted to be suspended only if all benefits attributable to participants’ service with all subclause I and E:\FR\FM\05MYR1.SGM 05MYR1 ehiers on DSK5VPTVN1PROD with RULES Federal Register / Vol. 81, No. 87 / Thursday, May 5, 2016 / Rules and Regulations subclause II employers were suspended to the maximum extent permissible. In support of this position, one commenter asserted that the Treasury Department and the IRS misinterpreted the import of the absence of the phrase ‘‘to the maximum extent permissible’’ in subclause (II). This commenter asserted that the combined use in subclause (II) of ‘‘second,’’ ‘‘except as provided by subclause (III),’’ and ‘‘all other benefits’’ has the same effect with respect to subclause II benefits as the use in subclause (I) of ‘‘to the maximum extent permissible’’ has with respect to subclause I benefits. This commenter argued that the difference in language between subclause (I) and subclause (II) does not prevent the two rules from having the same effect, and cited to Kirtsaeng v. John Wiley & Sons, Inc., 568 U.S. ___, 133 S. Ct. 1351, 1364 (2013) in support of this argument. After carefully considering this argument and applicable authorities, the Treasury Department and the IRS have concluded that this interpretation is incorrect; the statute does not require subclause II benefits to be suspended to the maximum extent permissible before any subclause III benefits are permitted to be suspended, and the rule set forth in the proposed regulations is the correct interpretation of the statute. Applicable case law establishes that a difference in language between one statutory provision and the next immediately following provision should be given meaning. See Loughrin v. United States, 573 U.S. __,134 S. Ct. 2384, 2390 (2014) (‘‘We have often noted that when ‘Congress includes particular language in one section of a statute but omits it in another’—let alone in the very next provision—this Court ‘presume[s]’ that Congress intended a difference in meaning.’’ (quoting Russello v. United States, 464 U.S. 16, 23 (1983)). To read subclause (II) to require that subclause II benefits be suspended ‘‘to the maximum extent permissible’’ even though that language does not appear in subclause (II) would effectively rewrite the statute either by moving the phrase the ‘‘to the maximum extent permissible’’ from subclause (I) to the introductory language of section 432(e)(9)(D)(vii) or by adding it to subclause (II).3 The interpretation in the proposed regulations is also consistent with the language in subclause (II) (‘‘except as provided in subclause (III)’’), which contemplates a coordinated application of two provisions that are to be applied ‘‘second’’ and ‘‘third;’’ this 3 See Hall v. United States, 566 U.S. __, 132 S. Ct. 1882, 1893 (2012) (‘‘[I]t is not for us to rewrite the statute.’’) VerDate Sep<11>2014 13:35 May 04, 2016 Jkt 238001 language in subclause (II) is not consistent with an interpretation that requires application of a suspension to subclause II benefits that is independent of (and entirely preceding) the application of the suspension to subclause III benefits. Kirtsaeng, which the one commenter cited to contest this interpretation in the proposed regulations, involved two phrases that ‘‘mean roughly the same thing.’’ Id. at 1358–59, 1364 (‘‘The language of [the relevant statute] read literally favors [petitioner’s] interpretation, namely, that ‘lawfully made under this title’ means made ‘in accordance with’ or ‘in compliance with’ the Copyright Act.’’). There are no ‘‘roughly’’ similar phrases across subclauses (I) and (II). Kirtsaeng is therefore inapposite.4 The Treasury Department and the IRS recognize that the language of section 432(e)(9)(D)(vii) bears some similarity to other statutory provisions that establish priority categories requiring claims to be fully satisfied under each earlier category before any claims are permitted to be satisfied under any subsequent category—for example, section 4044(a) of ERISA and sections 507(a) and 726(a) and (c) of the Bankruptcy Code, which in each instance prescribes ordering rules relating to the distribution of limited assets. However, in contrast to the language in section 432(e)(9)(D)(vii), these other statutory provisions do not include language in one category instructing that the category must be fully exhausted before reaching the next category, while omitting that language in other categories. Furthermore, if the ordinal numbering of section 432(e)(9)(D)(vii) were to be interpreted to require that each category be fully exhausted before reaching the next category, then the phrase ‘‘to the maximum extent permissible’’ in subclause (I) would not serve any purpose and would be superfluous.5 The broad scope of benefits included in subclause (III) further supports the conclusion that a suspension need not be applied to the maximum extent permissible to subclause II benefits before any suspension is applied to subclause III benefits. As explained in Section D of this preamble, subclause III benefits include all benefits that are 4 Kirtsaeng is further inapposite because the statutory provisions of the Copyright Act that were compared to each other in that case (i.e., 17 U.S.C. 109 and 602) were not in immediate proximity to each other unlike the subclauses at issue here. 5 See Marx v. General Revenue Corp., 568 U.S. __, 133 S. Ct. 1166, 1178 (2013) (‘‘[T]he canon against surplusage is strongest when an interpretation would render superfluous another part of the same statutory scheme.’’). PO 00000 Frm 00017 Fmt 4700 Sfmt 4700 27013 directly attributable to service with a subclause III employer, without regard to whether those benefits are subject to a make-whole agreement. If subclause II benefits were required to be reduced to the maximum extent permissible before any subclause III benefits could be reduced (including subclause III benefits not subject to a make-whole agreement), then participants with subclause III benefits who are not subject to the make-whole agreement could experience significantly smaller reductions than participants with subclause II benefits (including benefits attributable to service with employers that never withdrew from the plan), without regard to whether that difference is consistent with the equitable distribution requirement. For these reasons, these final regulations adopt the rule under the proposed regulations that subclause II benefits are not required to be suspended ‘‘to the maximum extent permissible’’ before any suspension is permitted to be applied to subclause III benefits. III. Standard for Application of Suspension to Subclause III Benefits Relative to Subclause II Benefits In order to give effect to the requirement that a suspension of benefits be applied ‘‘second’’ to subclause II benefits and ‘‘third’’ to subclause III benefits, the proposed regulations provided that a suspension would not be permitted to reduce subclause III benefits unless subclause II benefits were reduced to at least the same extent as subclause III benefits were reduced. Under the proposed regulations, this limitation would be satisfied if no participant’s benefits that are directly attributable to service with a subclause III employer were reduced more than that participant’s benefits would have been reduced if, holding constant the benefit formula, work history, and all relevant factors used to compute benefits, those benefits were attributable to service with any other employer. The effect of the proposed rule is to protect a subclause III employer from the possibility that the suspension would be expressly designed to take advantage of the employer’s commitment to make participants and beneficiaries whole for the reductions. Most commenters agreed with the analysis set forth in the preamble to the proposed regulations and supported the rule that a suspension would not be permitted to reduce subclause III benefits unless subclause II benefits are reduced to at least the same extent. However, one commenter maintained E:\FR\FM\05MYR1.SGM 05MYR1 27014 Federal Register / Vol. 81, No. 87 / Thursday, May 5, 2016 / Rules and Regulations ehiers on DSK5VPTVN1PROD with RULES that, if the Treasury Department and the IRS were to adopt the rule set forth in the proposed regulations intended to protect a subclause III employer, then the rule should be modified to prohibit facially neutral suspension provisions that have a disparate impact on subclause III benefits or that are intentionally designed to produce such an impact. Under such a rule, a suspension of benefits that disproportionally reduces subclause III benefits in the aggregate relative to subclause II benefits in the aggregate would be prohibited under section 432(e)(9)(D)(vii) even if the suspension does not by its terms treat individuals with subclause III benefits in a less favorable manner than similarly situated individuals with subclause II benefits. Nothing in the statute or preexisting case law requires the application of a disparate impact standard. Both Congress and the Supreme Court have required such a standard only in the unique context in which ‘‘barriers operate invidiously to discriminate on the basis of racial or other impermissible classification,’’ Griggs v. Duke Power Co., 401 U.S. 424, 431 (1971); see, e.g., 42 U.S.C. 2000e– 2(k)(1)(A)(i) (prohibiting ‘‘a particular employment practice that causes a disparate impact on the basis of race, color, religion, sex, or national origin’’); see also Texas Department of Housing and Community Affairs, et al., v. Inclusive Communities Project, Inc., et al., 576 U. S. ___, 135 S. Ct. 2507, 2513 (2015) (‘‘a disparate-impact claim challenges practices that have a ‘disproportionately adverse effect on minorities’ and are otherwise unjustified by a legitimate rationale’’). Those unique circumstances are not present here. After considering the public comments, the Treasury Department and the IRS have determined that the rule set forth in the proposed regulations appropriately protects a subclause III employer from the possibility that the suspension would be expressly designed to take advantage of the employer’s commitment to make participants and beneficiaries whole for the reductions in a manner that is most consistent with all of the statutory language.6 However, in response to comments identifying potential 6 The preamble to the proposed regulations requested comments on an alternative interpretation of section 432(e)(9)(vii) that would require that any suspension of benefits be applied to provide for a lesser reduction in benefits that are directly attributable to service with a subclause III employer than to benefits that are attributable to any other service. No commenters recommended adopting the alternative interpretation. VerDate Sep<11>2014 13:35 May 04, 2016 Jkt 238001 ambiguities in the proposed regulations, the application of this rule in the final regulations has been clarified. Accordingly, these final regulations provide that a suspension does not violate the required relationship between subclause III benefits and subclause II benefits if no individual’s benefits that are subclause III benefits are reduced more than that individual’s benefits would have been reduced if, holding constant the benefit formula, work history, and all other relevant factors used to determine the individual’s benefits, those benefits were attributable to service with any other employer. IV. Treatment of Participants With Service for a Subclause III Employer Who Are Not Covered by a Make-Whole Agreement The proposed regulations provided that the benefits described in section 432(e)(9)(D)(vii)(III) are any benefits that are directly attributable to a participant’s service with a subclause III employer, without regard to whether the employer has assumed liability for providing benefits to the participant or beneficiary that were reduced as a result of the financial status of the plan. For example, if, before the date a subclause III employer entered into a make-whole agreement, a participant commenced receiving retirement benefits under a plan that are directly attributable to service with that employer, then the participant’s benefits would be described in section 432(e)(9)(D)(vii)(III) even if those benefits were not covered by the make-whole agreement. This interpretation is based on the statutory language in section 432(e)(9)(D)(vii)(III), which defines the benefits to which that subclause applies as those benefits that are directly attributable to service with an employer that has met the conditions set forth in section 432(e)(9)(D)(vii)(III)(aa) and (bb). In other words, the statutory provision refers to benefits directly attributable to service with an employer described in subclause (III) and not only to benefits covered by the make-whole agreement. Some of the commenters on the proposed regulations expressed views regarding whether subclause III benefits should include benefits that are not covered by a make-whole agreement. Two commenters supported the rule set forth in the proposed regulations, under which subclause III benefits include all benefits directly attributable to service with a subclause III employer. Two other commenters expressed the view that subclause III benefits include only benefits that are covered by a makewhole agreement. The latter two PO 00000 Frm 00018 Fmt 4700 Sfmt 4700 commenters asserted that Congress included this provision in order to prevent a suspension from unreasonably shifting costs onto an employer that had entered into a make-whole agreement, and that this Congressional intent suggests that only benefits subject to the make-whole agreement were intended to be protected. They also noted that interpreting this provision to include benefits that are not covered by a makewhole agreement could result in benefits for many participants being covered under subclause III even if an employer entered into a make-whole agreement covering only a few participants, and argued that Congress did not intend such a result. After considering the public comments, the Treasury Department and the IRS remain convinced that the rule set forth in the proposed regulations reflects the plain language of the statute. The statute defines subclause III benefits as benefits attributable to service with a subclause III employer, not benefits covered by a make-whole agreement. Furthermore, the ability of an employer to take advantage of this interpretation by entering into a make-whole agreement that covers only a few participants is limited by the fact that subclause (III) applies only if all the conditions of subclause (III) (including the condition that the employer enter into a makewhole agreement) were satisfied prior to December 16, 2014 (the date of enactment of MPRA). Because this date has passed, there is no cause for concern that an employer could plan to become a subclause (III) employer. Accordingly, these regulations adopt the rule set forth in the proposed regulations under which subclause III benefits include all benefits attributable to a participant’s service with a subclause III employer without regard to whether the participant or beneficiary is covered by a make-whole agreement. Effective/Applicability Dates These regulations apply to suspensions for which the approval or denial is issued on or after April 26, 2016. In the case of a systemically important plan, these regulations apply with respect to any modified suspension implemented on or after April 26, 2016. 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 E:\FR\FM\05MYR1.SGM 05MYR1 Federal Register / Vol. 81, No. 87 / Thursday, May 5, 2016 / Rules and Regulations Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. The Regulatory Flexibility Act (RFA) (5 U.S.C. chapter 6) requires an agency to consider whether the rules it proposes will have a significant economic impact on a substantial number of small entities. In this case, the IRS and the Treasury Department believe that the regulations likely would not have a ‘‘significant economic impact on a substantial number of small entities.’’ 5 U.S.C. 605. This certification is based on the fact that the number of small entities affected by this rule is unlikely to be substantial because it is unlikely that a substantial number of small multiemployer plans in critical and declining status are subject to the limitation contained in section 432(e)(9)(D)(vii). Pursuant to section 7805(f) of the Code, the notice of proposed rulemaking preceding these regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. Contact Information For general questions regarding these regulations, please contact the Department of the Treasury MPRA guidance information line at (202) 622– 1559 (not a toll-free number). For information regarding a specific application for a suspension of benefits, please contact the Treasury Department at (202) 622–1534 (not a toll-free number). List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. Amendments to the Regulations Accordingly, 26 CFR part 1 is 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)–1 is amended by revising paragraph (d)(8) to read as follows: ■ ehiers on DSK5VPTVN1PROD with RULES § 1.432(e)(9)–1 Benefit suspensions for multiemployer plans in critical and declining status. * * * * * (d) * * * (8) Additional rules for plans described in section 432(e)(9)(D)(vii)— (i) In general. In the case of a plan that includes the benefits described in paragraph (d)(8)(i)(C) of this section, any VerDate Sep<11>2014 13:35 May 04, 2016 Jkt 238001 suspension of benefits under this section shall— (A) First, be applied to the maximum extent permissible to benefits attributable to a participant’s service for an employer that withdrew from the plan and failed to pay (or is delinquent with respect to paying) the full amount of its withdrawal liability under section 4201(b)(1) of ERISA or an agreement with the plan; (B) Second, except as provided by paragraph (d)(8)(i)(C) of this section, be applied to all other benefits that may be suspended under this section; and (C) Third, be applied to benefits under a plan that are directly attributable to a participant’s service with any employer that has, prior to December 16, 2014— (1) Withdrawn from the plan in a complete withdrawal under section 4203 of ERISA and paid the full amount of the employer’s withdrawal liability under section 4201(b)(1) of ERISA or an agreement with the plan; and (2) Pursuant to a collective bargaining agreement, assumed liability for providing benefits to participants and beneficiaries of the plan under a separate, single-employer plan sponsored by the employer, in an amount equal to any amount of benefits for such participants and beneficiaries reduced as a result of the financial status of the plan. (ii) Application of suspensions to benefits that are directly attributable to a participant’s service with certain employers—(A) Greater reduction in certain benefits not permitted. A suspension of benefits under this section must not be applied to provide for a greater reduction in benefits described in paragraph (d)(8)(i)(C) of this section than the reduction that is applied to benefits described in paragraph (d)(8)(i)(B) of this section. The requirement in the preceding sentence is satisfied if no individual’s benefits that are directly attributable to service with an employer described in paragraph (d)(8)(i)(C) of this section are reduced more than that individual’s benefits would have been reduced if, holding the benefit formula, work history, and all other relevant factors used to compute benefits constant, those benefits were attributable to service with an employer that is not described in paragraph (d)(8)(i)(C) of this section. (B) Application of limitation to benefits of participants with respect to which the employer has not assumed liability. Benefits described in paragraph (d)(8)(i)(C) of this section include all benefits of a participant or beneficiary that are directly attributable to service with an employer described in paragraph (d)(8)(i)(C) of this section PO 00000 Frm 00019 Fmt 4700 Sfmt 4700 27015 without regard to whether the employer has assumed liability for providing benefits to that participant or beneficiary that are reduced as a result of the financial status of the plan as described in paragraph (d)(8)(i)(C)(2) of this section. Thus, the rule of paragraph (d)(8)(ii)(A) of this section limits the amount by which a suspension of benefits is permitted to reduce benefits under a plan that are directly attributable to a participant’s service with such an employer, even if the employer has not, pursuant to a collective bargaining agreement that satisfies the requirements of paragraph (d)(8)(i)(C)(2) of this section, assumed liability with respect to that participant’s benefits. * * * * * John Dalrymple, Deputy Commissioner for Services and Enforcement. Approved: April 29, 2016. Mark J. Mazur, Assistant Secretary of the Treasury (Tax Policy). [FR Doc. 2016–10560 Filed 5–3–16; 4:15 pm] BILLING CODE 4830–01–P DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 110 [Docket Number USCG–2015–0825] RIN 1625–AA01 Anchorage Regulations; Delaware River, Philadelphia, PA Coast Guard, DHS. Final rule. AGENCY: ACTION: The Coast Guard is amending the geographic coordinates and modifying the regulated use of anchorage ‘‘10’’ in the Delaware River in the vicinity of the Navy Yard in Philadelphia, Pennsylvania. The change alters the size and use of the anchorage, reducing the anchorage in size and allowing the anchorage to be used as a general anchorage ground in the Delaware River. DATES: This rule is effective June 6, 2016. ADDRESSES: To view documents mentioned in this preamble as being available in the docket, go to http:// www.regulations.gov, type USCG–2015– 0825 in the ‘‘SEARCH’’ box and click ‘‘SEARCH.’’ Click on Open Docket Folder on the line associated with this rule. SUMMARY: E:\FR\FM\05MYR1.SGM 05MYR1

Agencies

[Federal Register Volume 81, Number 87 (Thursday, May 5, 2016)]
[Rules and Regulations]
[Pages 27011-27015]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-10560]


=======================================================================
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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9767]
RIN 1545-BN24


Additional Limitation on Suspension of Benefits Applicable to 
Certain Pension Plans Under the Multiemployer Pension Reform Act of 
2014

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

-----------------------------------------------------------------------

SUMMARY: The Multiemployer Pension Reform Act of 2014 (``MPRA''), which 
was enacted by Congress as part of the Consolidated and Further 
Continuing Appropriations Act of 2015, relates to multiemployer defined 
benefit pension plans that are projected to have insufficient funds, 
within a specified timeframe, to pay the full plan benefits to which 
individuals will be entitled (referred to as plans in ``critical and 
declining status''). Under MPRA, the sponsor of such a plan is 
permitted to reduce the pension benefits payable to plan participants 
and beneficiaries if certain conditions and limitations are satisfied 
(referred to in MPRA as a ``suspension of benefits''). One specific 
limitation governs the application of a suspension of benefits under 
any plan that includes benefits directly attributable to a 
participant's service with any employer that has withdrawn from the 
plan in a complete withdrawal, paid its full withdrawal liability, and, 
pursuant to a collective bargaining agreement, assumed liability for 
providing benefits to participants and beneficiaries equal to any 
benefits for such participants and beneficiaries reduced as a result of 
the financial status of the plan. This document contains final 
regulations that provide guidance relating to this specific limitation. 
These regulations affect active, retired, and deferred vested 
participants and beneficiaries under any such multiemployer plan in 
critical and declining status as well as employers contributing to, and 
sponsors and administrators of, those plans.

DATES: Effective date: These regulations are effective on May 5, 2016.
    Applicability date: These regulations apply to suspensions for 
which the approval or denial is issued on or after April 26, 2016. In 
the case of a systemically important plan, the final regulations apply 
with respect to any modified suspension implemented on or after April 
26, 2016.

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

SUPPLEMENTARY INFORMATION: 

Background

    This document contains amendments to the Income Tax Regulations (26 
CFR part 1) under section 432(e)(9) of the Internal Revenue Code 
(Code), as amended by section 201 of 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).\1\ As amended, section 432(e)(9) permits plan sponsors of 
certain multiemployer plans to reduce the plan benefits payable to 
participants and beneficiaries by plan amendment (referred to in the 
statute as a ``suspension of benefits'') if specified conditions are 
satisfied. A plan sponsor that seeks to implement a suspension of 
benefits must submit an application for approval of that suspension to 
the Secretary of the Treasury. 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), is 
required by the statute to approve the application upon finding that 
certain specified conditions are satisfied.
---------------------------------------------------------------------------

    \1\ Section 201 of MPRA makes parallel amendments to section 305 
of the Employee Retirement Income Security Act of 1974, Public Law 
93-406 (88 Stat. 829 (1974)), as amended (ERISA). The Treasury 
Department 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). Thus, these 
final Treasury regulations issued under section 432 of the Code 
apply as well for purposes of section 305 of ERISA.
---------------------------------------------------------------------------

    One condition, set forth in section 432(e)(9)(D)(vii), is a 
specific limitation on how a suspension of benefits must be applied 
under a plan that includes benefits that are directly attributable to a 
participant's service with any employer described in section 
432(e)(9)(D)(vii)(III). An employer is described in section 
432(e)(9)(D)(vii)(III) if the employer has, prior to the date MPRA was 
enacted (December 16, 2014): (1) Withdrawn from the plan in a complete 
withdrawal under section

[[Page 27012]]

4203 of ERISA; (2) paid the full amount of the employer's withdrawal 
liability under section 4201(b)(1) of ERISA or an agreement with the 
plan; and (3) pursuant to a collective bargaining agreement, assumed 
liability for providing benefits to participants and beneficiaries of 
the plan under a separate, single-employer plan sponsored by the 
employer, in an amount equal to any amount of benefits for these 
participants and beneficiaries reduced as a result of the financial 
status of the plan. Such an employer is referred to in this preamble as 
a ``subclause III employer,'' and a collective bargaining agreement 
under which the employer assumes liability for those benefits is 
referred to as a ``make-whole agreement.''
    If section 432(e)(9)(D)(vii) applies to a plan then, under section 
432(e)(9)(D)(vii)(I), the suspension of benefits must first be applied 
to the maximum extent permissible to benefits attributable to a 
participant's service with an employer that withdrew from the plan and 
failed to pay (or is delinquent with respect to paying) the full amount 
of its withdrawal liability under section 4201(b)(1) of ERISA or an 
agreement with the plan. Such an employer is referred to in this 
preamble as a ``subclause I employer.'' Second, under section 
432(e)(9)(D)(vii)(II), except as provided in section 
432(e)(9)(D)(vii)(III), a suspension of benefits must be applied to all 
other benefits under the plan that may be suspended. Third, under 
section 432(e)(9)(D)(vii)(III), a suspension must be applied to 
benefits under the plan that are directly attributable to a 
participant's service with a subclause III employer. An employer under 
the plan is referred to in this preamble as a ``subclause II employer'' 
if it is neither a subclause I employer nor a subclause III employer.
    On October 23, 2015, the Treasury Department published a notice in 
the Federal Register (80 FR 64508) regarding an application for a 
proposed suspension of benefits, which represented that the plan is of 
the type to which section 432(e)(9)(D)(vii) applies. The notice 
requested public comments on all aspects of the application, including 
with respect to the interpretation of section 432(e)(9)(D)(vii) that is 
reflected in the application.
    On February 11, 2016, the Treasury Department and the IRS published 
proposed regulations (REG-101701-16) regarding the specific limitation 
on a suspension of benefits under section 432(e)(9)(D)(vii) in the 
Federal Register at 81 FR 7253. Comments were received on the proposed 
regulations and a public hearing was held on March 22, 2016.
    After consideration of the written comments received and the oral 
comments presented at the public hearing, the provisions of the 
proposed regulations are adopted as revised by this Treasury decision. 
The Treasury Department consulted with PBGC and the Labor Department in 
developing these regulations.\2\
---------------------------------------------------------------------------

    \2\ The Treasury Department and the IRS have published final 
regulations providing general guidance regarding section 432(e)(9). 
See Sec.  1.432(e)(9)-1 (TD 9765), published in the Federal Register 
on April 28, 2016 (81 FR 25539).
    .
---------------------------------------------------------------------------

Explanation of Provisions

    These regulations amend the Income Tax Regulations (26 CFR part 1) 
to provide guidance regarding section 432(e)(9)(D)(vii). Section 
432(e)(9)(D)(vii) sets forth a rule that limits how a suspension may be 
applied under a plan that includes benefits that are directly 
attributable to a participant's service with a subclause III employer. 
In determining how a suspension should be allocated consistent with 
MPRA's framework and purpose, the Treasury Department and the IRS 
analyzed the statute and applied well-established principles of 
statutory construction to interpret section 432(e)(9)(D)(vii). In so 
doing, the Treasury Department and the IRS interpreted section 
432(e)(9)(D)(vii) in the context of section 432(e)(9) as a whole, which 
requires, among other things, that any suspension be subject to certain 
limitations, including that the suspension be equitably distributed 
across the participant and beneficiary population.

I. Application of a Suspension of Benefits to Subclause I Benefits to 
the Maximum Extent Permissible

    Subclause (I) of section 432(e)(9)(D)(vii) provides that the 
suspension of benefits must first be applied ``to the maximum extent 
permissible'' to benefits attributable to service with a subclause I 
employer (referred to in this preamble as ``subclause I benefits''). 
Accordingly, the proposed regulations provided that, for a plan that is 
subject to section 432(e)(9)(D)(vii), a suspension of benefits must be 
applied to the maximum extent permissible to subclause I benefits 
before reductions are permitted to be applied to any other benefits. 
Under the proposed regulations, only if such a suspension is not 
reasonably estimated to achieve the level that is necessary to enable 
the plan to avoid insolvency may a suspension then be applied to other 
benefits that are permitted to be suspended and that are attributable 
to a participant's service with other employers. No commenters objected 
to this provision of the proposed regulations, and these final 
regulations adopt this provision as proposed.

II. Relationship Between Subclause II Benefits and Subclause III 
Benefits

    In contrast to subclause (I) of section 432(e)(9)(D)(vii), 
subclause (II) does not include the phrase ``to the maximum extent 
permissible.'' Accordingly, the Treasury Department and the IRS 
developed the rules in the proposed regulations based on the 
interpretation that a suspension need not be applied to the maximum 
extent permissible to benefits described in subclause (II) before any 
suspension is applied to benefits described in subclause (III).
    A number of commenters expressed views regarding the rules under 
the proposed regulations describing how the suspension of benefits is 
permitted to apply to benefits attributable to service with a subclause 
II employer (referred to in this preamble as ``subclause II benefits'') 
and benefits directly attributable to service with a subclause III 
employer (referred to in this preamble as ``subclause III benefits''). 
Many of these commenters agreed with the analysis set forth in the 
preamble to the proposed regulations and supported an interpretation of 
the statute that subclause II benefits are not required to be reduced 
to the maximum extent permissible before any subclause III benefits can 
be reduced.
    Two commenters advocated that the statute be interpreted to require 
that subclause II benefits be suspended to the maximum extent 
permissible before a suspension is permitted to apply to any subclause 
III benefits. These commenters maintained that this result is required 
by the ordinal numbering of the three subclauses and asserted that 
Congress intended to favor any withdrawing employer that not only paid 
the full amount of its withdrawal liability but also entered into a 
make-whole agreement. If such an approach were applied under section 
432(e)(9)(D)(vii), then the benefits described in each of the first two 
subclauses would be required to be suspended to the maximum extent 
permissible before any suspension could apply to benefits described in 
the successive subclause. Under that approach, subclause III benefits 
would be permitted to be suspended only if all benefits attributable to 
participants' service with all subclause I and

[[Page 27013]]

subclause II employers were suspended to the maximum extent 
permissible. In support of this position, one commenter asserted that 
the Treasury Department and the IRS misinterpreted the import of the 
absence of the phrase ``to the maximum extent permissible'' in 
subclause (II). This commenter asserted that the combined use in 
subclause (II) of ``second,'' ``except as provided by subclause 
(III),'' and ``all other benefits'' has the same effect with respect to 
subclause II benefits as the use in subclause (I) of ``to the maximum 
extent permissible'' has with respect to subclause I benefits. This 
commenter argued that the difference in language between subclause (I) 
and subclause (II) does not prevent the two rules from having the same 
effect, and cited to Kirtsaeng v. John Wiley & Sons, Inc., 568 U.S. 
___, 133 S. Ct. 1351, 1364 (2013) in support of this argument.
    After carefully considering this argument and applicable 
authorities, the Treasury Department and the IRS have concluded that 
this interpretation is incorrect; the statute does not require 
subclause II benefits to be suspended to the maximum extent permissible 
before any subclause III benefits are permitted to be suspended, and 
the rule set forth in the proposed regulations is the correct 
interpretation of the statute. Applicable case law establishes that a 
difference in language between one statutory provision and the next 
immediately following provision should be given meaning. See Loughrin 
v. United States, 573 U.S. __,134 S. Ct. 2384, 2390 (2014) (``We have 
often noted that when `Congress includes particular language in one 
section of a statute but omits it in another'--let alone in the very 
next provision--this Court `presume[s]' that Congress intended a 
difference in meaning.'' (quoting Russello v. United States, 464 U.S. 
16, 23 (1983)). To read subclause (II) to require that subclause II 
benefits be suspended ``to the maximum extent permissible'' even though 
that language does not appear in subclause (II) would effectively 
rewrite the statute either by moving the phrase the ``to the maximum 
extent permissible'' from subclause (I) to the introductory language of 
section 432(e)(9)(D)(vii) or by adding it to subclause (II).\3\ The 
interpretation in the proposed regulations is also consistent with the 
language in subclause (II) (``except as provided in subclause (III)''), 
which contemplates a coordinated application of two provisions that are 
to be applied ``second'' and ``third;'' this language in subclause (II) 
is not consistent with an interpretation that requires application of a 
suspension to subclause II benefits that is independent of (and 
entirely preceding) the application of the suspension to subclause III 
benefits.
---------------------------------------------------------------------------

    \3\ See Hall v. United States, 566 U.S. __, 132 S. Ct. 1882, 
1893 (2012) (``[I]t is not for us to rewrite the statute.'')
---------------------------------------------------------------------------

    Kirtsaeng, which the one commenter cited to contest this 
interpretation in the proposed regulations, involved two phrases that 
``mean roughly the same thing.'' Id. at 1358-59, 1364 (``The language 
of [the relevant statute] read literally favors [petitioner's] 
interpretation, namely, that `lawfully made under this title' means 
made `in accordance with' or `in compliance with' the Copyright 
Act.''). There are no ``roughly'' similar phrases across subclauses (I) 
and (II). Kirtsaeng is therefore inapposite.\4\
---------------------------------------------------------------------------

    \4\ Kirtsaeng is further inapposite because the statutory 
provisions of the Copyright Act that were compared to each other in 
that case (i.e., 17 U.S.C. 109 and 602) were not in immediate 
proximity to each other unlike the subclauses at issue here.
---------------------------------------------------------------------------

    The Treasury Department and the IRS recognize that the language of 
section 432(e)(9)(D)(vii) bears some similarity to other statutory 
provisions that establish priority categories requiring claims to be 
fully satisfied under each earlier category before any claims are 
permitted to be satisfied under any subsequent category--for example, 
section 4044(a) of ERISA and sections 507(a) and 726(a) and (c) of the 
Bankruptcy Code, which in each instance prescribes ordering rules 
relating to the distribution of limited assets. However, in contrast to 
the language in section 432(e)(9)(D)(vii), these other statutory 
provisions do not include language in one category instructing that the 
category must be fully exhausted before reaching the next category, 
while omitting that language in other categories. Furthermore, if the 
ordinal numbering of section 432(e)(9)(D)(vii) were to be interpreted 
to require that each category be fully exhausted before reaching the 
next category, then the phrase ``to the maximum extent permissible'' in 
subclause (I) would not serve any purpose and would be superfluous.\5\
---------------------------------------------------------------------------

    \5\ See Marx v. General Revenue Corp., 568 U.S. __, 133 S. Ct. 
1166, 1178 (2013) (``[T]he canon against surplusage is strongest 
when an interpretation would render superfluous another part of the 
same statutory scheme.'').
---------------------------------------------------------------------------

    The broad scope of benefits included in subclause (III) further 
supports the conclusion that a suspension need not be applied to the 
maximum extent permissible to subclause II benefits before any 
suspension is applied to subclause III benefits. As explained in 
Section D of this preamble, subclause III benefits include all benefits 
that are directly attributable to service with a subclause III 
employer, without regard to whether those benefits are subject to a 
make-whole agreement. If subclause II benefits were required to be 
reduced to the maximum extent permissible before any subclause III 
benefits could be reduced (including subclause III benefits not subject 
to a make-whole agreement), then participants with subclause III 
benefits who are not subject to the make-whole agreement could 
experience significantly smaller reductions than participants with 
subclause II benefits (including benefits attributable to service with 
employers that never withdrew from the plan), without regard to whether 
that difference is consistent with the equitable distribution 
requirement.
    For these reasons, these final regulations adopt the rule under the 
proposed regulations that subclause II benefits are not required to be 
suspended ``to the maximum extent permissible'' before any suspension 
is permitted to be applied to subclause III benefits.

III. Standard for Application of Suspension to Subclause III Benefits 
Relative to Subclause II Benefits

    In order to give effect to the requirement that a suspension of 
benefits be applied ``second'' to subclause II benefits and ``third'' 
to subclause III benefits, the proposed regulations provided that a 
suspension would not be permitted to reduce subclause III benefits 
unless subclause II benefits were reduced to at least the same extent 
as subclause III benefits were reduced. Under the proposed regulations, 
this limitation would be satisfied if no participant's benefits that 
are directly attributable to service with a subclause III employer were 
reduced more than that participant's benefits would have been reduced 
if, holding constant the benefit formula, work history, and all 
relevant factors used to compute benefits, those benefits were 
attributable to service with any other employer. The effect of the 
proposed rule is to protect a subclause III employer from the 
possibility that the suspension would be expressly designed to take 
advantage of the employer's commitment to make participants and 
beneficiaries whole for the reductions.
    Most commenters agreed with the analysis set forth in the preamble 
to the proposed regulations and supported the rule that a suspension 
would not be permitted to reduce subclause III benefits unless 
subclause II benefits are reduced to at least the same extent. However, 
one commenter maintained

[[Page 27014]]

that, if the Treasury Department and the IRS were to adopt the rule set 
forth in the proposed regulations intended to protect a subclause III 
employer, then the rule should be modified to prohibit facially neutral 
suspension provisions that have a disparate impact on subclause III 
benefits or that are intentionally designed to produce such an impact. 
Under such a rule, a suspension of benefits that disproportionally 
reduces subclause III benefits in the aggregate relative to subclause 
II benefits in the aggregate would be prohibited under section 
432(e)(9)(D)(vii) even if the suspension does not by its terms treat 
individuals with subclause III benefits in a less favorable manner than 
similarly situated individuals with subclause II benefits.
    Nothing in the statute or preexisting case law requires the 
application of a disparate impact standard. Both Congress and the 
Supreme Court have required such a standard only in the unique context 
in which ``barriers operate invidiously to discriminate on the basis of 
racial or other impermissible classification,'' Griggs v. Duke Power 
Co., 401 U.S. 424, 431 (1971); see, e.g., 42 U.S.C. 2000e-2(k)(1)(A)(i) 
(prohibiting ``a particular employment practice that causes a disparate 
impact on the basis of race, color, religion, sex, or national 
origin''); see also Texas Department of Housing and Community Affairs, 
et al., v. Inclusive Communities Project, Inc., et al., 576 U. S. ___, 
135 S. Ct. 2507, 2513 (2015) (``a disparate-impact claim challenges 
practices that have a `disproportionately adverse effect on minorities' 
and are otherwise unjustified by a legitimate rationale''). Those 
unique circumstances are not present here.
    After considering the public comments, the Treasury Department and 
the IRS have determined that the rule set forth in the proposed 
regulations appropriately protects a subclause III employer from the 
possibility that the suspension would be expressly designed to take 
advantage of the employer's commitment to make participants and 
beneficiaries whole for the reductions in a manner that is most 
consistent with all of the statutory language.\6\ However, in response 
to comments identifying potential ambiguities in the proposed 
regulations, the application of this rule in the final regulations has 
been clarified. Accordingly, these final regulations provide that a 
suspension does not violate the required relationship between subclause 
III benefits and subclause II benefits if no individual's benefits that 
are subclause III benefits are reduced more than that individual's 
benefits would have been reduced if, holding constant the benefit 
formula, work history, and all other relevant factors used to determine 
the individual's benefits, those benefits were attributable to service 
with any other employer.
---------------------------------------------------------------------------

    \6\ The preamble to the proposed regulations requested comments 
on an alternative interpretation of section 432(e)(9)(vii) that 
would require that any suspension of benefits be applied to provide 
for a lesser reduction in benefits that are directly attributable to 
service with a subclause III employer than to benefits that are 
attributable to any other service. No commenters recommended 
adopting the alternative interpretation.
---------------------------------------------------------------------------

IV. Treatment of Participants With Service for a Subclause III Employer 
Who Are Not Covered by a Make-Whole Agreement

    The proposed regulations provided that the benefits described in 
section 432(e)(9)(D)(vii)(III) are any benefits that are directly 
attributable to a participant's service with a subclause III employer, 
without regard to whether the employer has assumed liability for 
providing benefits to the participant or beneficiary that were reduced 
as a result of the financial status of the plan. For example, if, 
before the date a subclause III employer entered into a make-whole 
agreement, a participant commenced receiving retirement benefits under 
a plan that are directly attributable to service with that employer, 
then the participant's benefits would be described in section 
432(e)(9)(D)(vii)(III) even if those benefits were not covered by the 
make-whole agreement. This interpretation is based on the statutory 
language in section 432(e)(9)(D)(vii)(III), which defines the benefits 
to which that subclause applies as those benefits that are directly 
attributable to service with an employer that has met the conditions 
set forth in section 432(e)(9)(D)(vii)(III)(aa) and (bb). In other 
words, the statutory provision refers to benefits directly attributable 
to service with an employer described in subclause (III) and not only 
to benefits covered by the make-whole agreement.
    Some of the commenters on the proposed regulations expressed views 
regarding whether subclause III benefits should include benefits that 
are not covered by a make-whole agreement. Two commenters supported the 
rule set forth in the proposed regulations, under which subclause III 
benefits include all benefits directly attributable to service with a 
subclause III employer. Two other commenters expressed the view that 
subclause III benefits include only benefits that are covered by a 
make-whole agreement. The latter two commenters asserted that Congress 
included this provision in order to prevent a suspension from 
unreasonably shifting costs onto an employer that had entered into a 
make-whole agreement, and that this Congressional intent suggests that 
only benefits subject to the make-whole agreement were intended to be 
protected. They also noted that interpreting this provision to include 
benefits that are not covered by a make-whole agreement could result in 
benefits for many participants being covered under subclause III even 
if an employer entered into a make-whole agreement covering only a few 
participants, and argued that Congress did not intend such a result.
    After considering the public comments, the Treasury Department and 
the IRS remain convinced that the rule set forth in the proposed 
regulations reflects the plain language of the statute. The statute 
defines subclause III benefits as benefits attributable to service with 
a subclause III employer, not benefits covered by a make-whole 
agreement. Furthermore, the ability of an employer to take advantage of 
this interpretation by entering into a make-whole agreement that covers 
only a few participants is limited by the fact that subclause (III) 
applies only if all the conditions of subclause (III) (including the 
condition that the employer enter into a make-whole agreement) were 
satisfied prior to December 16, 2014 (the date of enactment of MPRA). 
Because this date has passed, there is no cause for concern that an 
employer could plan to become a subclause (III) employer. Accordingly, 
these regulations adopt the rule set forth in the proposed regulations 
under which subclause III benefits include all benefits attributable to 
a participant's service with a subclause III employer without regard to 
whether the participant or beneficiary is covered by a make-whole 
agreement.

Effective/Applicability Dates

    These regulations apply to suspensions for which the approval or 
denial is issued on or after April 26, 2016. In the case of a 
systemically important plan, these regulations apply with respect to 
any modified suspension implemented on or after April 26, 2016.

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

[[Page 27015]]

Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations.
    The Regulatory Flexibility Act (RFA) (5 U.S.C. chapter 6) requires 
an agency to consider whether the rules it proposes will have a 
significant economic impact on a substantial number of small entities. 
In this case, the IRS and the Treasury Department believe that the 
regulations likely would not have a ``significant economic impact on a 
substantial number of small entities.'' 5 U.S.C. 605. This 
certification is based on the fact that the number of small entities 
affected by this rule is unlikely to be substantial because it is 
unlikely that a substantial number of small multiemployer plans in 
critical and declining status are subject to the limitation contained 
in section 432(e)(9)(D)(vii). Pursuant to section 7805(f) of the Code, 
the notice of proposed rulemaking preceding these regulations was 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small business.

Contact Information

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

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Amendments to the Regulations

    Accordingly, 26 CFR part 1 is 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. 7805 * * *


0
Par. 2. Section 1.432(e)(9)-1 is amended by revising paragraph (d)(8) 
to read as follows:


Sec.  1.432(e)(9)-1  Benefit suspensions for multiemployer plans in 
critical and declining status.

* * * * *
    (d) * * *
    (8) Additional rules for plans described in section 
432(e)(9)(D)(vii)--(i) In general. In the case of a plan that includes 
the benefits described in paragraph (d)(8)(i)(C) of this section, any 
suspension of benefits under this section shall--
    (A) First, be applied to the maximum extent permissible to benefits 
attributable to a participant's service for an employer that withdrew 
from the plan and failed to pay (or is delinquent with respect to 
paying) the full amount of its withdrawal liability under section 
4201(b)(1) of ERISA or an agreement with the plan;
    (B) Second, except as provided by paragraph (d)(8)(i)(C) of this 
section, be applied to all other benefits that may be suspended under 
this section; and
    (C) Third, be applied to benefits under a plan that are directly 
attributable to a participant's service with any employer that has, 
prior to December 16, 2014--
    (1) Withdrawn from the plan in a complete withdrawal under section 
4203 of ERISA and paid the full amount of the employer's withdrawal 
liability under section 4201(b)(1) of ERISA or an agreement with the 
plan; and
    (2) Pursuant to a collective bargaining agreement, assumed 
liability for providing benefits to participants and beneficiaries of 
the plan under a separate, single-employer plan sponsored by the 
employer, in an amount equal to any amount of benefits for such 
participants and beneficiaries reduced as a result of the financial 
status of the plan.
    (ii) Application of suspensions to benefits that are directly 
attributable to a participant's service with certain employers--(A) 
Greater reduction in certain benefits not permitted. A suspension of 
benefits under this section must not be applied to provide for a 
greater reduction in benefits described in paragraph (d)(8)(i)(C) of 
this section than the reduction that is applied to benefits described 
in paragraph (d)(8)(i)(B) of this section. The requirement in the 
preceding sentence is satisfied if no individual's benefits that are 
directly attributable to service with an employer described in 
paragraph (d)(8)(i)(C) of this section are reduced more than that 
individual's benefits would have been reduced if, holding the benefit 
formula, work history, and all other relevant factors used to compute 
benefits constant, those benefits were attributable to service with an 
employer that is not described in paragraph (d)(8)(i)(C) of this 
section.
    (B) Application of limitation to benefits of participants with 
respect to which the employer has not assumed liability. Benefits 
described in paragraph (d)(8)(i)(C) of this section include all 
benefits of a participant or beneficiary that are directly attributable 
to service with an employer described in paragraph (d)(8)(i)(C) of this 
section without regard to whether the employer has assumed liability 
for providing benefits to that participant or beneficiary that are 
reduced as a result of the financial status of the plan as described in 
paragraph (d)(8)(i)(C)(2) of this section. Thus, the rule of paragraph 
(d)(8)(ii)(A) of this section limits the amount by which a suspension 
of benefits is permitted to reduce benefits under a plan that are 
directly attributable to a participant's service with such an employer, 
even if the employer has not, pursuant to a collective bargaining 
agreement that satisfies the requirements of paragraph (d)(8)(i)(C)(2) 
of this section, assumed liability with respect to that participant's 
benefits.
* * * * *

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
    Approved: April 29, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2016-10560 Filed 5-3-16; 4:15 pm]
 BILLING CODE 4830-01-P