81 FR 7253 - Additional Limitation on Suspension of Benefits Applicable to Certain Pension Plans Under the Multiemployer Pension Reform Act of 2014

DEPARTMENT OF THE TREASURY
Internal Revenue Service

Federal Register Volume 81, Issue 28 (February 11, 2016)

Page Range		7253-7256
FR Document		2016-02772
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under any plan that includes benefits directly attributable to a participant's service with any employer that has withdrawn from the plan in a complete withdrawal, paid its full withdrawal liability, and, pursuant to a collective bargaining agreement, assumed liability for providing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 proposed regulations that would 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.
Federal Register, Volume 81 Issue 28 (Thursday, February 11, 2016)
[Federal Register Volume 81, Number 28 (Thursday, February 11, 2016)]
[Proposed Rules]
[Pages 7253-7256]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-02772]



[[Page 7253]]

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-101701-16]
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: Notice of proposed rulemaking and notice of public hearing.

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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 proposed 
regulations that would 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: Comments must be received by March 15, 2016. Outlines of topics 
to be discussed at the public hearing scheduled for March 22, 2016 must 
be received by March 15, 2016.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-101701-16), room 
5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-
101701-16), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC, or sent electronically via the Federal 
eRulemaking Portal at http://www.regulations.gov (IRS REG-101701-16). 
The public hearing will be held in the IRS Auditorium, Internal Revenue 
Building, 1111 Constitution Avenue NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, the 
Department of the Treasury MPRA guidance information line at (202) 622-
1559; concerning submissions of comments, the hearing, and/or being 
placed on the building access list to attend the hearing, Regina 
Johnson at (202) 317-6901 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    This document contains proposed 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 that 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 upon finding that certain specified 
conditions are satisfied. One condition is that the plan is in critical 
and declining status, meaning that the plan is projected to have 
insufficient funds, within a specified timeframe, to pay the full 
benefits to which individuals will be entitled under the plan.
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    \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 
proposed Treasury regulations issued under section 432 of the Code 
apply as well for purposes of section 305 of ERISA.
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    Another 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, as described in section 432(e)(9)(D)(vii)(III), 
includes benefits that are directly attributable to a participant's 
service with any employer that has, prior to the date MPRA was enacted, 
withdrawn from the plan in a complete withdrawal under section 4203 of 
ERISA, paid the full amount of the employer's withdrawal liability 
under section 4201(b)(1) of ERISA or an agreement with the plan, and, 
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 the agreement to assume liability for those benefits is 
referred to as a ``make-whole agreement.''
    If the specific limitation of section 432(e)(9)(D)(vii) applies to 
a plan, then section 432(e)(9)(D)(vii)(I) requires that the suspension 
of benefits 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. Third, under section 432(e)(9)(D)(vii)(III), a 
suspension must be applied to benefits under a plan that are directly 
attributable to a participant's service with a subclause III employer.
    On June 19, 2015, the Treasury Department and the IRS published 
temporary regulations (TD 9723) under section 432(e)(9) in the Federal 
Register (80 FR 35207) providing general guidance regarding section 
432(e)(9) as well as outlining the requirements for a plan sponsor of a 
plan that is in critical and declining status to apply for approval of 
a suspension of benefits and for the Treasury Department to begin 
processing such an application. A notice of proposed rulemaking cross-

[[Page 7254]]

referencing the temporary regulations (REG-102648-15) and providing 
additional guidance was published in the same issue of the Federal 
Register (80 FR 35262). Neither the temporary nor the proposed 
regulations include guidance regarding the limitation under section 
432(e)(9)(D)(vii).
    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. The Treasury Department and the IRS have 
considered the comments received in response to that notice in 
developing these proposed regulations.

Explanation of Provisions

    These proposed regulations would amend the Income Tax Regulations 
(26 CFR part 1) to provide guidance regarding section 
432(e)(9)(D)(vii). The Treasury Department consulted with PBGC and the 
Labor Department in developing these proposed regulations. These 
proposed regulations would add a new paragraph (d)(8) to proposed Sec.  
1.432(e)(9)-1 and do not otherwise affect the provisions of the 
proposed regulations published in the Federal Register (80 FR 35262) on 
June 19, 2015.
    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 any employer 
that, as defined in section 432(e)(9)(D)(vii)(III), has withdrawn, paid 
the full amount of its withdrawal liability, and, 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 multiemployer plan. 
In determining how a suspension should be allocated consistent with the 
statutory framework, the Treasury Department and the IRS analyzed the 
statute and applied principles of statutory construction.
    Subclause (I) of section 432(e)(9)(D)(vii) provides that the 
suspension of benefits should first be applied ``to the maximum extent 
permissible.'' Accordingly, the Treasury Department and the IRS 
conclude that reductions with respect to benefits attributable to 
service with a subclause I employer must be applied first to the 
maximum extent permissible before reductions are permitted to be 
applied to any other benefits. Consequently, these proposed regulations 
require that a suspension of benefits under a plan that is subject to 
section 432(e)(9)(D)(vii) be applied to the maximum extent permissible 
to benefits attributable to service with a subclause I employer. 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.
    In contrast, subclause (II) does not include the phrase ``to the 
maximum extent permissible,'' and therefore the Treasury Department and 
the IRS have concluded that the best interpretation of section 
432(e)(9)(D)(vii) is 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).\2\ This interpretation is also consistent with the language in 
subclause (II) providing for application of a suspension ``except as 
provided in subclause (III),'' contemplating a coordinated application 
of those subclauses, which are to be applied ``second'' and ``third,'' 
respectively.\3\ Because of the order of application of subclauses (II) 
and (III) and the coordinated application described in the preceding 
sentence, the Treasury Department and the IRS conclude that the best 
interpretation of section 432(e)(9)(D)(vii) is that the application of 
a suspension to benefits described in subclause (II) must be greater 
than or equal to the application of the suspension to benefits 
described in subclause (III).
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    \2\ See Loughrin v. United States, 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 benefits be suspended ``to the maximum extent 
permissible'' without that language would either render that 
language superfluous in subclause (I), see Marx v. General Revenue 
Corp., 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.''), or 
effectively rewrite subclause (II) to include that requirement, see 
Hall v. United States, 132 S. Ct. 1882, 1893 (2012) (``[I]t is not 
for us to rewrite the statute.'').
    \3\ See Corley v. United States, 556 U.S. 303, 314 (2009) 
(rejecting constructions ``at odds with the basic interpretive canon 
that ` ``[a] statute should be construed [to give effect] to all its 
provisions, so that no part will be inoperative or superfluous, void 
or insignificant'' ' '' (quoting Hibbs v. Winn, 542 U.S. 88, 101 
(2004)).
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    Under these proposed regulations, a suspension would not be 
permitted to reduce benefits directly attributable to service with a 
subclause III employer, unless other benefits are first reduced and are 
reduced to at least the same extent (thus protecting a subclause III 
employer from the possibility that the suspension would be expressly 
designed to take advantage of the employer's agreement to make 
participants and beneficiaries whole for the reductions). Under these 
proposed regulations, a suspension would not violate this restriction 
if no participant's benefits that are directly attributable to service 
with a subclause III employer 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 that 
participant's service with any other employer.
    These proposed regulations would also provide that the benefits 
described in section 432(e)(9)(D)(vii)(III) are any benefits for a 
participant under a plan that are directly attributable to service with 
a subclause III employer, without regard to whether the employer has 
assumed liability for providing benefits to the participant that were 
reduced as a result of the financial status of the plan. For example, 
if a participant commenced receiving retirement benefits under a plan, 
which are directly attributable to service with such an employer, 
before the date the employer entered into a make-whole agreement, 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.
    The Treasury Department and the IRS are also considering an 
alternative to the ordering rule set forth in these proposed 
regulations. Under the alternative, as under the proposed regulations, 
the rule would require that a suspension of benefits under a plan that 
is subject to

[[Page 7255]]

section 432(e)(9)(D)(vii) be applied to the maximum extent permissible 
to benefits attributable to service with a subclause I employer before 
any suspension is applied to benefits attributable to service with 
other employers. However, in contrast to the approach described in 
these proposed regulations, the alternative would require that any such 
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. 
The alternative approach could be satisfied if, for example, benefits 
that are directly attributable to service with a subclause III employer 
are reduced less, on a percentage basis, than benefits would have been 
reduced if, holding constant the benefit formula, work history, and all 
other relevant factors used to determine benefits, those benefits were 
attributable to service with any other employer.
    The Treasury Department and the IRS recognize that the language of 
section 432(e)(9)(D)(vii) has similarities 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 of ERISA provides for the allocation of pension plan 
assets in the event of a distress termination and for categories of 
payments to be made ``in the following order:'' ``First,'' ``Second,'' 
``Third,'' ``Fourth,'' ``Fifth'' and ``Sixth.'' \4\
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    \4\ The regulations interpreting this provision provide: ``If 
the plan has sufficient assets to pay for all benefits in a priority 
category, the remaining assets shall then be allocated to the next 
lower priority category. This process shall be repeated until all 
benefits in priority categories 1 through 6 have been provided or 
until all available plan assets have been allocated.'' See 29 CFR 
4044.10(d).
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    If such an approach were applied under section 432(e)(9)(D)(vii), 
then the maximum permitted suspension would be required to be imposed 
with respect to benefits described in each subclause before any 
suspension could apply to benefits described in a successive subclause. 
Under that approach, any suspension of benefits would first have to be 
applied to the maximum extent permissible to benefits attributable to a 
participant's service with a subclause I employer. Only if such a 
suspension were not reasonably estimated to achieve the level that is 
necessary to enable the plan to avoid insolvency would the suspension 
then be applied to other benefits that are permitted to be suspended 
and that are attributable to a participant's service with any other 
employers (except for benefits that are directly attributable to 
service with a subclause III employer). Under this approach, only if 
the additional suspension were not reasonably estimated to achieve the 
level that is necessary to enable the plan to avoid insolvency would 
the suspension then be applied also to benefits directly attributable 
to a participant's service with a subclause III employer.
    Based on the language of the statute as well as principles of 
statutory construction described in this preamble, the proposed 
regulations and alternative rule do not reflect the approach described 
in the preceding paragraph.\5\ In addition, in contrast to section 4044 
of ERISA, which includes the language ``in the following order,'' there 
is no similar generally applicable ordering language in section 
432(e)(9)(D)(vii) and section 305(e)(9)(D)(vii) of ERISA. As under 
section 4044 of ERISA, in enacting section 432(e)(9)(D)(vii) and its 
counterpart under ERISA, Congress could readily have used consistent 
language in describing the scope of permissible benefit suspensions 
with respect to the benefits described in each of the three statutory 
subclauses. Instead of doing so, Congress created a distinction in 
describing the treatment of benefits described in the three subclauses 
in section 432(e)(9)(D)(vii).\6\ For these reasons, the Treasury 
Department and the IRS have concluded that the best reading of 
Congressional intent is that a suspension of benefits described in 
section 432(e)(9)(D)(vii)(II) does not need to be applied ``to the 
maximum extent permissible'' before any suspension is permitted to be 
applied to benefits described in section 432(e)(9)(D)(vii)(III). 
However, the Treasury Department and the IRS request comments on 
whether ``to the maximum extent permissible'' should be applied to 
benefits described in subclause II in the final regulations.
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    \5\ See footnotes 2 and 3 and accompanying text.
    \6\ That is, the phrase ``to the maximum extent permissible'' 
appears in subclause (I) but not in subclause (II).
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Effective/Applicability Dates

    These regulations are proposed to be effective on and apply with 
respect to suspensions for which the approval or denial is issued on or 
after the date of publication of the Treasury decision adopting these 
rules as final regulations in the Federal Register.

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.
    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, 
this notice of proposed rulemaking has been submitted to the Chief 
Counsel of Advocacy of the Small Business Administration for comment on 
its impact on small business.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any comments that are submitted timely 
to the Treasury Department and the IRS as prescribed in this preamble 
in the ADDRESSES section. The Treasury Department and the IRS request 
comments on all aspects of these proposed regulations, including the 
interaction of the provisions of the proposed regulation with the 
limitation described in section 432(e)(9)(D)(vi) relating to the 
requirement that a suspension of benefits be equitably distributed.
    In addition to the comment request included in this preamble under 
the ``Explanation of Provisions'' heading, the Treasury Department and 
the IRS request comments regarding the alternative rule also described 
under the ``Explanation of Provisions'' heading or any other 
alternative. With respect to the alternative rule described in this 
preamble, comments are specifically requested regarding whether 
satisfaction of the alternative rule described in this preamble should 
be required on an individual-by-individual basis or on an aggregate 
basis (comparing the aggregate suspension of benefits that are directly 
attributable to service with a subclause III employer to what the 
aggregate

[[Page 7256]]

would have been if, holding constant the benefit formula, work history, 
and all other relevant factors used to determine benefits, those 
benefits were attributable to service with any other employer).
    All comments will be available for public inspection and copying at 
www.regulations.gov or upon request. Please Note: All comments will be 
made available to the public. Do not include any personally 
identifiable information (such as Social Security number, name, 
address, or other contact information) or confidential business 
information that you do not want publicly disclosed. All comments may 
be posted on the Internet and can be retrieved by most Internet search 
engines.
    A public hearing on these proposed regulations has been scheduled 
for March 22, 2016 beginning at 10 a.m. in the Auditorium, Internal 
Revenue Service, 1111 Constitution Avenue NW., Washington, DC. Due to 
building security procedures, visitors must enter at the Constitution 
Avenue entrance. In addition, all visitors must present photo 
identification to enter the building. Because of access restrictions, 
visitors will not be admitted beyond the immediate entrance area more 
than 30 minutes before the hearing starts. For information about having 
your name placed on the building access list to attend the hearing, see 
the FOR FURTHER INFORMATION CONTACT section of this preamble.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments at the hearing must submit written or 
electronic comments by March 15, 2016, and an outline of topics to be 
discussed and the amount of time to be devoted to each topic by March 
15, 2016. A period of 10 minutes will be allotted to each person for 
making comments. An agenda showing the scheduling of the speakers will 
be prepared after the deadline for receiving outlines has passed. 
Copies of the agenda will be available free of charge at the hearing.

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.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be 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 added to read as follows:


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

    (a) through (c) [Reserved]
    (d) Limitations on suspension. (1) through (7) [Reserved]
    (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. This requirement is 
satisfied if no participant'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 participant's benefits would have 
been reduced if, holding the benefit formula, work history, and all 
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 under 
a plan that are directly attributable to a participant's service with 
an employer described in paragraph (d)(8)(i)(C) of this section include 
all such benefits without regard to whether the employer has assumed 
liability for providing benefits to the participant that were reduced 
as a result of the financial status of the plan as described in 
paragraph (d)(8)(i)(C)(2) of this section. Thus, all benefits under a 
plan that are directly attributable to a participant's service with an 
employer described in paragraph (d)(8)(i)(C) of this section are 
subject to the limitation in paragraph (d)(8)(ii)(A) of this section, 
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 for providing those benefits to 
participants and beneficiaries of the plan.

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2016-02772 Filed 2-9-16; 4:15 pm]
 BILLING CODE 4830-01-P
Federal Register / Vol. 81, No. 28 / Thursday, February 11, 2016 / Proposed Rules 7253

DEPARTMENT OF THE TREASURY Washington, DC 20044. Submissions pay the full benefits to which
may be hand-delivered Monday through individuals will be entitled under the
Internal Revenue Service Friday between the hours of 8 a.m. and plan.
4 p.m. to: CC:PA:LPD:PR (REG–101701– Another condition, set forth in section
26 CFR Part 1 16), Courier’s Desk, Internal Revenue 432(e)(9)(D)(vii), is a specific limitation
Service, 1111 Constitution Avenue NW., on how a suspension of benefits must be
[REG–101701–16]
Washington, DC, or sent electronically applied under a plan that, as described
RIN 1545–BN24 via the Federal eRulemaking Portal at in section 432(e)(9)(D)(vii)(III), includes
http://www.regulations.gov (IRS REG– benefits that are directly attributable to
Additional Limitation on Suspension of 101701–16). The public hearing will be a participant’s service with any
Benefits Applicable to Certain Pension held in the IRS Auditorium, Internal employer that has, prior to the date
Plans Under the Multiemployer Revenue Building, 1111 Constitution MPRA was enacted, withdrawn from the
Pension Reform Act of 2014 Avenue NW., Washington, DC. plan in a complete withdrawal under
AGENCY: Internal Revenue Service (IRS), FOR FURTHER INFORMATION CONTACT:
section 4203 of ERISA, paid the full
Treasury. Concerning the regulations, the amount of the employer’s withdrawal
Department of the Treasury MPRA liability under section 4201(b)(1) of
ACTION: Notice of proposed rulemaking
guidance information line at (202) 622– ERISA or an agreement with the plan,
and notice of public hearing.
1559; concerning submissions of and, pursuant to a collective bargaining
SUMMARY: The Multiemployer Pension agreement, assumed liability for
comments, the hearing, and/or being
Reform Act of 2014 (‘‘MPRA’’), which providing benefits to participants and
placed on the building access list to
was enacted by Congress as part of the beneficiaries of the plan under a
attend the hearing, Regina Johnson at
Consolidated and Further Continuing separate, single-employer plan
(202) 317–6901 (not toll-free numbers).
Appropriations Act of 2015, relates to sponsored by the employer, in an
SUPPLEMENTARY INFORMATION: amount equal to any amount of benefits
multiemployer defined benefit pension
plans that are projected to have Background for these participants and beneficiaries
insufficient funds, within a specified reduced as a result of the financial
This document contains proposed status of the plan. Such an employer is
timeframe, to pay the full plan benefits amendments to the Income Tax
to which individuals will be entitled referred to in this preamble as a
Regulations (26 CFR part 1) under ‘‘subclause III employer,’’ and the
(referred to as plans in ‘‘critical and section 432(e)(9) of the Internal Revenue
declining status’’). Under MPRA, the agreement to assume liability for those
Code (Code), as amended by section 201 benefits is referred to as a ‘‘make-whole
sponsor of such a plan is permitted to of the Multiemployer Pension Reform
reduce the pension benefits payable to agreement.’’
Act of 2014, Division O of the If the specific limitation of section
plan participants and beneficiaries if Consolidated and Further Continuing
certain conditions and limitations are 432(e)(9)(D)(vii) applies to a plan, then
Appropriations Act, 2015, Public Law section 432(e)(9)(D)(vii)(I) requires that
satisfied (referred to in MPRA as a 113–235 (128 Stat. 2130 (2014))
‘‘suspension of benefits’’). One specific the suspension of benefits first be
(MPRA).1 As amended, section 432(e)(9) applied to the maximum extent
limitation governs the application of a permits plan sponsors of certain
suspension of benefits under any plan permissible to benefits attributable to a
multiemployer plans to reduce the plan participant’s service with an employer
that includes benefits directly benefits payable to participants and that withdrew from the plan and failed
attributable to a participant’s service beneficiaries by plan amendment to pay (or is delinquent with respect to
with any employer that has withdrawn (referred to in the statute as a paying) the full amount of its
from the plan in a complete withdrawal, ‘‘suspension of benefits’’) if specified withdrawal liability under section
paid its full withdrawal liability, and, conditions are satisfied. A plan sponsor 4201(b)(1) of ERISA or an agreement
pursuant to a collective bargaining that seeks to implement a suspension of with the plan. Such an employer is
agreement, assumed liability for benefits must submit an application that referred to in this preamble as a
providing benefits to participants and the Secretary of the Treasury, in ‘‘subclause I employer.’’ Second, under
beneficiaries equal to any benefits for consultation with the Pension Benefit section 432(e)(9)(D)(vii)(II), except as
such participants and beneficiaries Guaranty Corporation and the Secretary provided in section 432(e)(9)(D)(vii)(III),
reduced as a result of the financial of Labor (generally referred to in this a suspension of benefits must be applied
status of the plan. This document preamble as the Treasury Department, to all other benefits. Third, under
contains proposed regulations that PBGC, and Labor Department, section 432(e)(9)(D)(vii)(III), a
would provide guidance relating to this respectively), is required by the statute suspension must be applied to benefits
specific limitation. These regulations to approve upon finding that certain under a plan that are directly
affect active, retired, and deferred specified conditions are satisfied. One attributable to a participant’s service
vested participants and beneficiaries condition is that the plan is in critical with a subclause III employer.
under any such multiemployer plan in and declining status, meaning that the On June 19, 2015, the Treasury
critical and declining status as well as plan is projected to have insufficient Department and the IRS published
employers contributing to, and sponsors funds, within a specified timeframe, to temporary regulations (TD 9723) under
and administrators of, those plans. section 432(e)(9) in the Federal Register
DATES: Comments must be received by 1 Section 201 of MPRA makes parallel (80 FR 35207) providing general
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March 15, 2016. Outlines of topics to be amendments to section 305 of the Employee guidance regarding section 432(e)(9) as
discussed at the public hearing Retirement Income Security Act of 1974, Public
Law 93–406 (88 Stat. 829 (1974)), as amended
well as outlining the requirements for a
scheduled for March 22, 2016 must be (ERISA). The Treasury Department has interpretive plan sponsor of a plan that is in critical
received by March 15, 2016. jurisdiction over the subject matter of these and declining status to apply for
ADDRESSES: Send submissions to: provisions under ERISA as well as the Code. See approval of a suspension of benefits and
also section 101 of Reorganization Plan No. 4 of
CC:PA:LPD:PR (REG–101701–16), room 1978 (43 FR 47713). Thus, these proposed Treasury
for the Treasury Department to begin
5205, Internal Revenue Service, P.O. regulations issued under section 432 of the Code processing such an application. A notice
Box 7604, Ben Franklin Station, apply as well for purposes of section 305 of ERISA. of proposed rulemaking cross-

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7254 Federal Register / Vol. 81, No. 28 / Thursday, February 11, 2016 / Proposed Rules

referencing the temporary regulations Department and the IRS conclude that described in subclause (II) must be
(REG–102648–15) and providing reductions with respect to benefits greater than or equal to the application
additional guidance was published in attributable to service with a subclause of the suspension to benefits described
the same issue of the Federal Register I employer must be applied first to the in subclause (III).
(80 FR 35262). Neither the temporary maximum extent permissible before Under these proposed regulations, a
nor the proposed regulations include reductions are permitted to be applied suspension would not be permitted to
guidance regarding the limitation under to any other benefits. Consequently, reduce benefits directly attributable to
section 432(e)(9)(D)(vii). these proposed regulations require that service with a subclause III employer,
On October 23, 2015, the Treasury a suspension of benefits under a plan unless other benefits are first reduced
Department published a notice in the that is subject to section 432(e)(9)(D)(vii) and are reduced to at least the same
Federal Register (80 FR 64508) be applied to the maximum extent extent (thus protecting a subclause III
regarding an application for a proposed permissible to benefits attributable to employer from the possibility that the
suspension of benefits, which service with a subclause I employer. suspension would be expressly
represented that the plan is of the type Only if such a suspension is not designed to take advantage of the
to which section 432(e)(9)(D)(vii) reasonably estimated to achieve the employer’s agreement to make
applies. The notice requested public level that is necessary to enable the plan participants and beneficiaries whole for
comments on all aspects of the to avoid insolvency may a suspension the reductions). Under these proposed
application, including with respect to then be applied to other benefits that are regulations, a suspension would not
the interpretation of section permitted to be suspended and that are violate this restriction if no participant’s
432(e)(9)(D)(vii) that is reflected in the attributable to a participant’s service benefits that are directly attributable to
application. The Treasury Department with other employers. service with a subclause III employer
and the IRS have considered the In contrast, subclause (II) does not are reduced more than that individual’s
comments received in response to that include the phrase ‘‘to the maximum benefits would have been reduced if,
notice in developing these proposed extent permissible,’’ and therefore the holding constant the benefit formula,
regulations. Treasury Department and the IRS have work history, and all other relevant
concluded that the best interpretation of factors used to determine the
Explanation of Provisions
section 432(e)(9)(D)(vii) is that a individual’s benefits, those benefits
These proposed regulations would suspension need not be applied to the were attributable to that participant’s
amend the Income Tax Regulations (26 maximum extent permissible to benefits service with any other employer.
CFR part 1) to provide guidance described in subclause (II) before any These proposed regulations would
regarding section 432(e)(9)(D)(vii). The suspension is applied to benefits also provide that the benefits described
Treasury Department consulted with described in subclause (III).2 This in section 432(e)(9)(D)(vii)(III) are any
PBGC and the Labor Department in interpretation is also consistent with the benefits for a participant under a plan
developing these proposed regulations. language in subclause (II) providing for that are directly attributable to service
These proposed regulations would add application of a suspension ‘‘except as with a subclause III employer, without
a new paragraph (d)(8) to proposed provided in subclause (III),’’ regard to whether the employer has
§ 1.432(e)(9)-1 and do not otherwise contemplating a coordinated application assumed liability for providing benefits
affect the provisions of the proposed of those subclauses, which are to be to the participant that were reduced as
regulations published in the Federal applied ‘‘second’’ and ‘‘third,’’ a result of the financial status of the
Register (80 FR 35262) on June 19, 2015. respectively.3 Because of the order of plan. For example, if a participant
Section 432(e)(9)(D)(vii) sets forth a application of subclauses (II) and (III) commenced receiving retirement
rule that limits how a suspension may and the coordinated application benefits under a plan, which are directly
be applied under a plan that includes described in the preceding sentence, the attributable to service with such an
benefits that are directly attributable to Treasury Department and the IRS employer, before the date the employer
a participant’s service with any conclude that the best interpretation of entered into a make-whole agreement,
employer that, as defined in section section 432(e)(9)(D)(vii) is that the then the participant’s benefits would be
432(e)(9)(D)(vii)(III), has withdrawn, application of a suspension to benefits described in section 432(e)(9)(D)(vii)(III)
paid the full amount of its withdrawal even if those benefits were not covered
liability, and, pursuant to a collective 2 See Loughrin v. United States, 134 S. Ct. 2384, by the make-whole agreement. This
bargaining agreement, assumed liability 2390 (2014) (‘‘We have often noted that when interpretation is based on the statutory
for providing benefits to participants ‘Congress includes particular language in one
section of a statute but omits it in another’—let
language in section 432(e)(9)(D)(vii)(III),
and beneficiaries of the plan under a alone in the very next provision—this Court which defines the benefits to which that
separate, single-employer plan ‘presume[s]’ that Congress intended a difference in subclause applies as those benefits that
sponsored by the employer, in an meaning.’’ (quoting Russello v. United States, 464 are directly attributable to service with
U.S. 16, 23 (1983)). To read subclause (II) to require
amount equal to any amount of benefits that benefits be suspended ‘‘to the maximum extent an employer that has met the conditions
for such participants and beneficiaries permissible’’ without that language would either set forth in section
reduced as a result of the financial render that language superfluous in subclause (I), 432(e)(9)(D)(vii)(III)(aa) and (bb). In
status of the multiemployer plan. In see Marx v. General Revenue Corp., 133 S. Ct. 1166, other words, the statutory provision
1178 (2013) (‘‘[T]he canon against surplusage is
determining how a suspension should strongest when an interpretation would render refers to benefits directly attributable to
be allocated consistent with the superfluous another part of the same statutory service with an employer described in
statutory framework, the Treasury scheme.’’), or effectively rewrite subclause (II) to subclause III, and not only to benefits
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Department and the IRS analyzed the include that requirement, see Hall v. United States, covered by the make-whole agreement.
132 S. Ct. 1882, 1893 (2012) (‘‘[I]t is not for us to
statute and applied principles of rewrite the statute.’’).
The Treasury Department and the IRS
statutory construction. 3 See Corley v. United States, 556 U.S. 303, 314 are also considering an alternative to the
Subclause (I) of section (2009) (rejecting constructions ‘‘at odds with the ordering rule set forth in these proposed
432(e)(9)(D)(vii) provides that the basic interpretive canon that ‘ ‘‘[a] statute should be regulations. Under the alternative, as
construed [to give effect] to all its provisions, so
suspension of benefits should first be that no part will be inoperative or superfluous, void
under the proposed regulations, the rule
applied ‘‘to the maximum extent or insignificant’’ ’ ’’ (quoting Hibbs v. Winn, 542 would require that a suspension of
permissible.’’ Accordingly, the Treasury U.S. 88, 101 (2004)). benefits under a plan that is subject to

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Federal Register / Vol. 81, No. 28 / Thursday, February 11, 2016 / Proposed Rules 7255

section 432(e)(9)(D)(vii) be applied to participant’s service with any other of Executive Order 12866, as
the maximum extent permissible to employers (except for benefits that are supplemented and reaffirmed by
benefits attributable to service with a directly attributable to service with a Executive Order 13563. Therefore, a
subclause I employer before any subclause III employer). Under this regulatory impact assessment is not
suspension is applied to benefits approach, only if the additional required. It also has been determined
attributable to service with other suspension were not reasonably that section 553(b) of the Administrative
employers. However, in contrast to the estimated to achieve the level that is Procedure Act (5 U.S.C. chapter 5) does
approach described in these proposed necessary to enable the plan to avoid not apply to these regulations.
regulations, the alternative would insolvency would the suspension then The Regulatory Flexibility Act (RFA)
require that any such suspension of be applied also to benefits directly (5 U.S.C. chapter 6) requires an agency
benefits be applied to provide for a attributable to a participant’s service to consider whether the rules it
lesser reduction in benefits that are with a subclause III employer. proposes will have a significant
directly attributable to service with a Based on the language of the statute economic impact on a substantial
subclause III employer than to benefits as well as principles of statutory number of small entities. In this case,
that are attributable to any other service. construction described in this preamble, the IRS and the Treasury Department
The alternative approach could be the proposed regulations and alternative believe that the regulations likely would
satisfied if, for example, benefits that are rule do not reflect the approach not have a ‘‘significant economic impact
directly attributable to service with a described in the preceding paragraph.5 on a substantial number of small
subclause III employer are reduced less, In addition, in contrast to section 4044 entities.’’ 5 U.S.C. 605. This certification
on a percentage basis, than benefits of ERISA, which includes the language is based on the fact that the number of
would have been reduced if, holding ‘‘in the following order,’’ there is no small entities affected by this rule is
constant the benefit formula, work similar generally applicable ordering unlikely to be substantial because it is
history, and all other relevant factors language in section 432(e)(9)(D)(vii) and unlikely that a substantial number of
used to determine benefits, those section 305(e)(9)(D)(vii) of ERISA. As small multiemployer plans in critical
benefits were attributable to service under section 4044 of ERISA, in and declining status are subject to the
with any other employer. enacting section 432(e)(9)(D)(vii) and its limitation contained in section
The Treasury Department and the IRS counterpart under ERISA, Congress 432(e)(9)(D)(vii). Pursuant to section
recognize that the language of section could readily have used consistent 7805(f) of the Code, this notice of
432(e)(9)(D)(vii) has similarities to other language in describing the scope of proposed rulemaking has been
statutory provisions that establish permissible benefit suspensions with submitted to the Chief Counsel of
priority categories requiring claims to be respect to the benefits described in each Advocacy of the Small Business
fully satisfied under each earlier of the three statutory subclauses. Instead Administration for comment on its
category before any claims are permitted of doing so, Congress created a impact on small business.
to be satisfied under any subsequent distinction in describing the treatment Comments and Public Hearing
category. For example, section 4044 of of benefits described in the three
ERISA provides for the allocation of Before these proposed regulations are
subclauses in section 432(e)(9)(D)(vii).6 adopted as final regulations,
pension plan assets in the event of a For these reasons, the Treasury
distress termination and for categories consideration will be given to any
Department and the IRS have concluded comments that are submitted timely to
of payments to be made ‘‘in the that the best reading of Congressional
following order:’’ ‘‘First,’’ ‘‘Second,’’ the Treasury Department and the IRS as
intent is that a suspension of benefits prescribed in this preamble in the
‘‘Third,’’ ‘‘Fourth,’’ ‘‘Fifth’’ and described in section 432(e)(9)(D)(vii)(II) ADDRESSES section. The Treasury
‘‘Sixth.’’ 4 does not need to be applied ‘‘to the
If such an approach were applied Department and the IRS request
maximum extent permissible’’ before comments on all aspects of these
under section 432(e)(9)(D)(vii), then the any suspension is permitted to be
maximum permitted suspension would proposed regulations, including the
applied to benefits described in section interaction of the provisions of the
be required to be imposed with respect 432(e)(9)(D)(vii)(III). However, the
to benefits described in each subclause proposed regulation with the limitation
Treasury Department and the IRS described in section 432(e)(9)(D)(vi)
before any suspension could apply to request comments on whether ‘‘to the
benefits described in a successive relating to the requirement that a
maximum extent permissible’’ should suspension of benefits be equitably
subclause. Under that approach, any be applied to benefits described in
suspension of benefits would first have distributed.
subclause II in the final regulations. In addition to the comment request
to be applied to the maximum extent
permissible to benefits attributable to a Effective/Applicability Dates included in this preamble under the
participant’s service with a subclause I ‘‘Explanation of Provisions’’ heading,
These regulations are proposed to be the Treasury Department and the IRS
employer. Only if such a suspension effective on and apply with respect to
were not reasonably estimated to request comments regarding the
suspensions for which the approval or alternative rule also described under the
achieve the level that is necessary to denial is issued on or after the date of
enable the plan to avoid insolvency ‘‘Explanation of Provisions’’ heading or
publication of the Treasury decision any other alternative. With respect to
would the suspension then be applied adopting these rules as final regulations
to other benefits that are permitted to be the alternative rule described in this
in the Federal Register. preamble, comments are specifically
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suspended and that are attributable to a
Special Analyses requested regarding whether satisfaction
4 The regulations interpreting this provision
of the alternative rule described in this
Certain IRS regulations, including this preamble should be required on an
provide: ‘‘If the plan has sufficient assets to pay for
all benefits in a priority category, the remaining
one, are exempt from the requirements individual-by-individual basis or on an
assets shall then be allocated to the next lower aggregate basis (comparing the aggregate
5 Seefootnotes 2 and 3 and accompanying text.
priority category. This process shall be repeated
until all benefits in priority categories 1 through 6 6 Thatis, the phrase ‘‘to the maximum extent
suspension of benefits that are directly
have been provided or until all available plan assets permissible’’ appears in subclause (I) but not in attributable to service with a subclause
have been allocated.’’ See 29 CFR 4044.10(d). subclause (II). III employer to what the aggregate

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Document Created: 2016-02-11 00:03:05
Document Modified: 2016-02-11 00:03:05
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Proposed Rules
Action		Notice of proposed rulemaking and notice of public hearing.
Dates		Comments must be received by March 15, 2016. Outlines of topics to be discussed at the public hearing scheduled for March 22, 2016 must be received by March 15, 2016.
Contact		Concerning the regulations, the Department of the Treasury MPRA guidance information line at (202) 622- 1559; concerning submissions of comments, the hearing, and/or being placed on the building access list to attend the hearing, Regina Johnson at (202) 317-6901 (not toll-free numbers).
FR Citation		81 FR 7253
RIN Number		1545-BN24
CFR Associated		Income Taxes and Reporting and Recordkeeping Requirements
81 FR 7253 - Additional Limitation on Suspension of Benefits Applicable to Certain Pension Plans Under the Multiemployer Pension Reform Act of 2014

DEPARTMENT OF THE TREASURYInternal Revenue Service

Federal Register Volume 81, Issue 28 (February 11, 2016)

DEPARTMENT OF THE TREASURY
Internal Revenue Service
