Proposed Guidance Issued for Multiemployer Plan Suspension of Benefits

The IRS proposal would provide guidance about any employer that has withdrawn from the plan and entered into a “make-whole” agreement to provide participant benefits.

The Internal Revenue Service (IRS) has revealed new proposed guidance impacting multiemployer plans, “Additional Limitation on Suspension of Benefits Applicable to Certain Pension Plans Under the Multiemployer Pension Reform Act of 2014.”

The guidance explains that the Multiemployer Pension Reform Act (MPRA) 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under any plan that includes benefits directly attributable to a participant’s service with any employer that has withdrawn from the plan in a complete withdrawal, paid its full withdrawal liability, and, pursuant to a collective bargaining agreement, assumed liability for providing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 IRS proposed regulations provide guidance relating to this specific limitation. The regulations would 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.

Text of the proposal is here. Comments are due by March 15.