New Limits Proposed on Suspension of Benefits Applicable to Certain Pension Plans

The IRS has proposed additional limitations on suspension of benefits applicable to certain pension plans under the Multiemployer Pension Reform Act of 2014 (MPRA).

The IRS in RIN 1545-BN24 has proposed regulations that would provide guidance regarding a provision of the MPRA that governs the 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• withdrawn from the plan in a complete withdrawal;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

• under a collective bargaining agreement, assumed liability for providing benefits to participants and beneficiaries equal to any benefits for such participants and beneficiaries that are reduced due to the plan’s financial status.

The proposed limitations would amend Treas. Reg. §1.432(e)(9)-1 to provide that for such plans, suspension of benefits shall:

• 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 in paying) the full amount of its withdrawal liability under ERISA Section 4201(b)(1) or an agreement with the plan;

• be applied to all other benefits that may be suspended under Internal Revenue Code Section 432, except as provided by Section 432(d)(8)(i)(C); and

• be applied to benefits under a plan that are directly attributable to a participant’s service with any employer that has, before Dec. 16, 2014: (1) withdrawn from the plan in a complete withdrawal under ERISA Section 4203 and paid the full amount of the employer’s withdrawal liability under ERISA Section 4201(b)(1) or an agreement with the plan; and (2) under 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 due to the plan’s financial status.

The proposed limitations also would change the application of suspensions to benefits that are directly attributable to a participant’s service with certain employers, as well as the application of limitations to benefits of participants for which the employer has not assumed liability.

Effective/Applicability Dates

The IRS proposes that these regulations be effective on the date the Treasury Department’s decision adopting the rules as final regulations is published in the Federal Register. The IRS also proposes that they apply to suspensions on or after that date.

Public Comments and Hearing

The IRS will accept comments on the proposed regulations through March 15, 2016, and will hold a public hearing on the proposed regulations on March 22. Details about submitting comments and attending the hearing are provided in the Federal Register notice.