Regulations: Additional limits on suspension of benefits, pension plans

Limits on suspension of benefits, pension plans

The Treasury Department and IRS today released for publication in the Federal Register final regulations (T.D. 9767) that finalize regulations proposed in February 2016 concerning the additional limitation on the suspension of benefits applicable to certain pension plans under the Multiemployer Pension Reform Act of 2014.

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Today’s final regulations [PDF 311 KB] provide guidance regarding section 432(e)(9)(D)(vii), and describe comments received with respect to the proposed regulations. 

The final regulations will appear in the Federal Register on May 5, 2016, and apply for suspensions for which the approval or denial was issued on or after April 26, 2016, and in the case of a systemically important plan, with respect to any modified suspension implemented on or after April 26, 2016.

Background

The Multiemployer Pension Reform Act of 2014 (MPRA), enacted 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 the MPRA provisions, the sponsor of a plan in “critical and declining status’ is permitted to reduce the pension benefits payable to plan participants and beneficiaries if certain conditions and limitations are satisfied (this is referred to 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under any plan that includes benefits directly attributable to a participant’s service with any employer that has withdrawn from the plan in a complete withdrawal, paid its full withdrawal liability, and, pursuant to a collective bargaining agreement, assumed liability for providing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.

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