IRS Updates Procedures For Obtaining Amortization Period Extensions For Unfunded Plan Liability.

SECTION 1. PURPOSE

This revenue procedure describes the procedure by which the plan sponsor of a multiemployer pension plan may request and obtain approval of an extension of an amortization period in accordance with § 431(d) of the Internal Revenue Code of 1986 (Code).

SECTION 2. BACKGROUND INFORMATION

.01 Section 431(d). -- Section 431(d) was added to the Code as part of a significant revision of the funding rules for pension plans qualified under § 401(a) made by the Pension Protection Act of 2006 (PPA). Parallel provisions to § 431(d) can be found at § 304(d) of the Employee Retirement Income Security Act of 1974 (ERISA). The Secretary of the Treasury has interpretive and enforcement jurisdiction over both provisions.

Section 431(d)(1) provides that if the plan sponsor of a multiemployer plan submits to the Secretary of the Treasury an application for an extension of the amortization period for any unfunded liability described in § 431(b)(2)(B) or 431(b)(4) (referred to in this revenue procedure as a "charge base"), and includes the certification by the plan's actuary described in § 431(d)(1)(B), the Secretary shall extend the amortization period for the period (not in excess of five years) requested in the application. An extension under § 431(d)(1) is referred to as an automatic extension. In addition, § 431(d)(2)(A) provides that the plan sponsor of a multiemployer plan may submit an application for an extension of the amortization period for any such charge base, and the Secretary may extend the amortization period for a period of time not in excess of 10 years less the number of years of any automatic extension with respect to such charge base, if the Secretary makes the determination described in § 431(d)(2)(B). An extension under § 431(d)(2) is referred to as an alternative extension. Section 431(d)(3) requires that an applicant provide notice of the extension application to each affected party described in § 4001(a)(21) of ERISA.

.02 Rev. Proc. 2008-67. -- Rev. Proc. 2008-67, 2008-48 I.R.B. 1211, provided the procedure for submitting an application for a ruling on an amortization extension with respect to plan years starting after December 31, 2007. This revenue procedure differs from Rev. Proc. 2008-67 in a number of ways. The major differences include: modifications to the list of affected parties to whom notification must be made (adding the Pension Benefit Guaranty Corporation (PBGC) and removing contributing employers); extension of the period for submission of an application; and modification of the treatment of automatic extension applications for purposes of certifying a plan's status under § 432(b)(3) of the Code. This revenue procedure also clarifies certain other aspects of Rev. Proc. 2008-67. In addition, the model notice in this revenue procedure now includes a plain language explanation section and a Comment and IRS Acknowledgement Sheet.

03 . Section 431(b)(8). -- Section 211(a)(2) of the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PRA 2010), Pub. L. No. 111-192, added § 431(b)(8) to the Code. Section 431(b)(8)(A) provides a special amortization rule for certain net investment losses in the case of a multiemployer plan that meets a solvency test. The special rule applies to the portion of the plan's experience loss or gain for a plan year attributable to net investment losses (if any) incurred in either or both of the first two plan years ending after August 31, 2008 (an eligible loss year). This portion of the experience loss or gain may be treated as an item separate from other experience losses, to be amortized in equal annual installments (until fully amortized) over the period beginning with the plan year in which such portion is first recognized in the actuarial value of assets and ending with the last plan year in the 30-plan-year period beginning with the eligible loss year. Under § 431(b)(8)(A)(ii)(I), the amortization period under the special amortization rule cannot be further extended under § 431(d). In addition, under § 431(b)(8)(A)(ii)(II), if an extension of an amortization period was granted under § 431(d) for any plan year before a decision to apply the special amortization rule for the plan year, that extension cannot result in the amortization period under the special amortization rule exceeding 30 years.

SECTION 3. APPLICATIONS TO EXTEND AN AMORTIZATION PERIOD -- IN GENERAL

.01 Who may submit. -- An application for approval to extend the period of years required to amortize any unfunded liability must be submitted by the plan sponsor (i.e., the board of trustees of the plan, and referred to in this revenue procedure as the applicant or Board) or by an authorized representative of the applicant. The application must be signed by an authorized trustee who is a current member of the Board or by an authorized representative of the applicant who either must be identified in (a), (b), or (c) of subsection 9.02(11) of Rev. Proc. 2010-4, 2010-1 I.R.B. 122, or must be an enrolled actuary within the meaning of § 7701(a)(35). Where an authorized representative signs the application or will appear before the Service in connection with the application, a Form 2848, Power of Attorney and Declaration of Representative, must be submitted with the application. An individual is not an authorized representative of the applicant merely on account of being an administrator or trustee of the plan.

.02 Submission. -- An application must be submitted to:

.03 Required Information. -- An application must contain the information required by § 4 and/or § 5 of this revenue procedure, as applicable. Applications must include the plan name, the plan sponsor's employer identification number, and the plan number. Applications must also include a statement that the notice required by § 3.05 of this revenue procedure has been provided, a description of the method of delivery used to satisfy the notice requirement, and a copy of the notice.

.04 Necessary Procedural Documents. -- An application will not be considered unless it complies with (1) and (2) below.

(1) The application must contain a declaration in the following form: "Under penalties of perjury, I declare that I have examined this request, or this modification to the request, including accompanying documents, and, to the best of my knowledge and belief, the request or the modification contains all the relevant facts relating to the request or the modification, and such facts are true, correct, and complete." This declaration must be signed by an authorized trustee who is a current member of the Board. The signature of an individual with a power of attorney will not suffice for the declaration. See § 9.02(13) of Rev. Proc. 2010-4.

(2) Because the application constitutes a request for a ruling, compliance with § 6110 is also required. Section 601.201 of the Statement of Procedural Rules sets forth the requirements applicable to requests for rulings and determination letters which are subject to § 6110. Section 601.201(e) furnishes specific instructions to applicants.

The applicant must provide with the application either a statement of proposed deletions and the statutory basis for each proposed deletion, or a statement that no information other than names, addresses, and taxpayer identifying numbers need be deleted.

.05 Notification. -- Within 14 days prior to the date of an application, the applicant must provide a copy of a written notice to each affected party (within the meaning of § 4001(a)(21) of ERISA) stating that an application for an extension of the amortization period under § 431(d) is being submitted to the Service. This includes each employee organization representing employees covered by the plan, each participant, beneficiary, and alternate payee (within the meaning of § 414(p)(8)) of the Code), and the PBGC. The original of the notice must bear a signature by an authorized trustee who is a current member of the applicant's Board and must be in substantially the form set forth in the Model Notice found in Appendix A to this revenue procedure. The Service does not require the applicant to furnish any information to affected parties in addition to that required by the Model Notice in Appendix A as part of the extension application process, but additional information may be provided by the applicant pursuant to the collective bargaining process or otherwise.

The notice must be hand-delivered or mailed to the last known address of each employee organization, participant, beneficiary, and alternate payee. Alternatively, the notice may be delivered electronically in accordance with the requirements of § 1.401(a)-21 of the Income Tax Regulations. Merely posting the notice on a bulletin board is not sufficient to satisfy this notice requirement. If the applicant makes a reasonable effort to carry out the provisions of this paragraph, then failure of an employee organization, participant, beneficiary, or alternate payee to receive the notice will not cause the applicant to fail the notice requirement.

Notice to the PBGC may be submitted electronically to MultiemployerProgram@pbgc.gov or may be sent to the following address:

.07 Coordination of Extension Applications. -- The total length of an amortization period extension permitted under paragraphs (1) and (2) of § 431(d) of the Code for a charge base is limited to 10 years. Section 4 of this revenue procedure relates to automatic extensions under § 431(d)(1). Section 5 of this revenue procedure relates to alternative extensions under § 431(d)(2). An automatic extension for a charge base may not exceed five years. An alternative extension for a charge base may be for up to 10 years less any automatic extension approved for that charge base. An applicant requesting both types of extension may do so in a single application. However, such an application must include the information specified in § 4.01 below (including the actuarial certification described in § 4.01(4)), the information specified in § 5.01 below, and a completed copy of the checklist that appears as Appendix B of this revenue procedure. Such a combined application will be considered a single ruling request. If the applicant requests both types of extension in a single application, the Service may approve the automatic extension without approving the alternative extension.

.08 Modification of Existing Extension. -- If a plan has already received under § 431(d), or under § 412(e) as in effect before the effective date of PPA, an extension for less than 10 years of the amortization period on any charge base, an application for an alternative extension may be submitted modifying the extension on such charge base to a total of 10 years (taken together with the original extension). Even if the original extension was for less than five years, no such modification of an extension may be requested as an automatic extension.

.09 Interim Effect of Application. -- Whether the Service has ruled on an application does not affect the 90-day deadline for certification of a multiemployer plan's status under § 432(b)(3) of the Code. In making this certification, if the plan has submitted an application for an automatic extension under § 431(d)(1) and the Service has not yet ruled on the application, the actuary must treat the application as approved. However, for certifications made before January 1, 2011, the actuary may, but is not required to, treat as approved an application for an automatic extension on which the Service has not yet ruled. The provisions in the preceding two sentences do not apply if the application was submitted after the deadline specified in Section 6, or if the actuary has reason to believe that the standards of this revenue procedure have not been met for the application submitted.

SECTION 4. APPLICATION FOR AUTOMATIC EXTENSION

.01 Information to be provided. -- An applicant for an automatic extension must furnish the following information:

(1) A list of the charge bases for which an extension of the amortization periods is requested.

(2) The length of the extension of the amortization period being requested for each of the charge bases listed in (1) above (up to a maximum of five years). No extension will be granted with respect to an amortization period for net investment losses described under § 431(b)(8)(A)(i).

(3) Whether a prior application for an automatic or alternative amortization extension under § 431(d), or amortization extension under § 412(e) as in effect before the effective date of PPA, was or was not approved with respect to any of the charge bases for which an extension is requested, including, if approved, the length of the extension, and, if denied, the reason for the denial and an explanation of why the reason for the denial no longer applies.

(4) A certification by the plan's actuary that, based on reasonable assumptions:

.03 Applicable Period. -- The procedures of this § 4 shall not apply with respect to any application submitted after December 31, 2014, in accordance with § 431(d)(1)(C).

SECTION 5. APPLICATION FOR ALTERNATIVE EXTENSION

.01 Information to be provided. -- An applicant for an alternative extension must furnish appropriate evidence that the extension of the amortization period would carry out the purposes of ERISA and PPA and would provide adequate protection for participants and their beneficiaries, and that the failure to permit the extension would (I) result in a substantial risk to the voluntary continuation of the plan, or a substantial curtailment of pension benefit levels or employee compensation, and (II) be adverse to the interests of plan participants in the aggregate. What constitutes appropriate evidence will depend on the facts and circumstances of each case. A response must be furnished for each of paragraphs (1) through (5) below. In certain cases, some of the material described in paragraphs (1) through (5) may be inapplicable, unavailable, inappropriate, or burdensome to furnish. In such cases, the applicant must furnish a statement indicating why the material for a particular paragraph is inapplicable, unavailable, inappropriate, or burdensome.

SECTION 6. DEADLINE FOR REQUESTING AN EXTENSION

All extension applications must be submitted by the 15^th day of the third calendar month following the last day of the first plan year for which the extension is intended to take effect. The Service will consider applications for extensions submitted after this date only upon a showing of good cause. In seeking an alternative extension of an amortization period with respect to a plan year which has not yet ended, the applicant may have difficulty in furnishing sufficient current information in support of the application. For this reason, it is generally advised that an application not be submitted earlier than 90 days prior to the end of the plan year for which the extension is requested. This 90-day period does not apply to applications for an automatic extension. Section 431(d)(2)(C) of the Code requires that the Service act on an application for an alternative extension within 180 days of receiving the application. An application will not be considered received until the applicable information required by §§ 4.01, 5.01, and 5.02 of this revenue procedure has been received. The Service will provide notification to the applicant of the date upon which it has full receipt of all required information. The Service will close, without issuing a ruling, the file on a submission for which not all of the required documentation is provided in a timely manner.

SECTION 7. BANKRUPTCY PETITIONS

If a significant number of contributing employers or any of the principal employers file a bankruptcy petition after the application for an extension of an amortization period is submitted to the Service, the applicant must provide to the Service an update to the information required to be submitted in § 5 of this revenue procedure, especially the financial information in §§ 5.01(2) and 5.01(3).

SECTION 8. EFFECTIVE DATE

This revenue procedure is effective for all ruling requests submitted on or after January 1, 2011. Ruling requests submitted before January 1, 2011, may use this revenue procedure or Rev. Proc. 2008-67.

SECTION 9. EFFECT ON OTHER REVENUE PROCEDURES

Rev. Proc. 2010-4, 2010-1 I.R.B. 122, is modified to the extent that this revenue procedure provides special procedures for issuing rulings with respect to applications for an extension of an amortization period.

Rev. Proc. 2008-67 is superseded effective for applications submitted on or after January 1, 2011.

SECTION 10. PAPERWORK REDUCTION ACT

The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. § 3507) under control number 1545-1890.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

The collection of information in this revenue procedure is in §§ 3, 4 and 5, and Appendix B. This collection of information is required to evaluate, process, and obtain approval of the application for an extension of an amortization period. This information will be used to make determinations on extensions of the amortization period under § 431(d). The likely respondents are businesses or other for-profit institutions and nonprofit institutions.

The estimated total annual reporting/recordkeeping burden is 2,500 hours.

The estimated annual burden per respondent/recordkeeper varies from 71 to 129 hours, depending on individual circumstances, with an estimated average burden of 100 hours. The estimated number of respondents/recordkeepers is 25.

The estimated annual frequency of responses is one.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. § 6103.

DRAFTING INFORMATION

The principal author of this revenue procedure is Tony Montanaro of the Employee Plans, Tax Exempt and Government Entities Division. Questions about this revenue procedure and its application may be directed by email to RetirementPlanQuestions@irs.gov.

This notice is to inform you that the [Insert plan name] is requesting a ruling from the IRS to extend certain amortization period(s).

Why is the pension plan sending you this notice? Pension plans are required by law to send out notices to affected parties when certain events happen, such as when the plan requests a ruling from the IRS for certain purposes.

What the notice does: The notice alerts you to a ruling the pension plan is requesting from the IRS. You are not required to take any action at all. The reason for the notice is to tell you about an action being taken by the pension plan, and to inform you that you have a right to comment on the ruling the plan is requesting from the IRS. If you wish, you may comment to the IRS on the ruling request, in accordance with the terms stated in Technical Provisions, Part II below. Or, if you wish, you may take no action at all. Also, Information about Funded Status of Plan, Part III, explains how you may obtain more information regarding the plan from the plan administrator, or from the Department of Labor.

What kind of ruling is the plan requesting? The plan's participating employers are required to pay sufficient contributions to the retirement fund, over a specified period of years, to bring the level of funding equal to the plan's long term obligations. The ruling request is to extend the period of years required to fund the obligations.

What the notice does not do: This notice does not obligate you to do anything. It gives you an opportunity to comment if you wish. This notice does not enable the IRS to explain your benefits, or to adjust them in any way. The IRS does not maintain data about your benefits under the plan. If you wish to obtain information about your benefits, you should ask the plan administrator. The notice does not allow the IRS to give you information about a requested ruling. Disclosure laws prohibit the IRS from giving out such information. However, see Information about Funded Status of Plan, Part III below, for an explanation of your right under § 101(k) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), to request information from the plan administrator that is relevant to the amortization extension application.

What the requested ruling would not do: The ruling the pension plan is requesting would not change your accrued benefit. If the IRS were eventually to decide in favor of the requested ruling, the ruling would neither reduce your accrued benefit nor eliminate the obligation of the contributing employers to continue to fund benefits. If the ruling request is approved by the IRS, your pension plan remains obligated to pay your benefits as determined under the plan documents.

Part II. Technical Provisions

This notice is to inform you that an application for an extension of an amortization period for unfunded liability under § 431(d) of the Internal Revenue Code (Code) and § 304(d) of ERISA will be submitted by [INSERT APPLICANT'S NAME] to the Internal Revenue Service (IRS) for the [INSERT PLAN NAME] for the plan year beginning [INSERT DATE].

The IRS will grant an automatic extension if the plan's actuary certifies that the plan's funded status meets certain standards described in § 431(d)(1) of the Code. The IRS may also grant an alternative extension if it determines (A) that the extension would carry out the purposes of ERISA and the Pension Protection Act of 2006 and would provide adequate protection for participants, and (B) that failure to permit the extension would result in substantial risk to the continuation of the plan, and would be adverse to the interests of the plan participants in the aggregate. The plan is applying for (check one or both, as appropriate):

__ an automatic extension, and/or

Part III. Information about Funded Status of Plan

As required by § 104(b)(2) and (4) of ERISA, the plan administrator must furnish a copy of the latest annual plan report upon written request and make the annual report available for inspection at its principal office, which is located at [INSERT ADDRESS]. Under § 101(k)(1) of ERISA, any application for an extension of the amortization period under § 304(d) of ERISA or § 431(d) of the Code (including the application for extension described in this notice) and the determination made by the IRS with respect to such application may be obtained upon request by writing to the plan administrator at the above address. Such documents must be furnished by the plan administrator no later than 30 days after receipt of the written request. Section 502(c)(4) of ERISA grants the Department of Labor the authority to assess civil penalties not to exceed $1,000 per day for each violation of § 101(k).

[Instruction: If the plan administrator makes a reasonable charge to cover copying, mailing, and other costs of furnishing copies permitted under § 101(k) of ERISA, the amount of such charge should be stated in the notice.]

In accordance with § 104 of ERISA, annual financial reports for this plan, which include employer contributions made to the plan for any plan year, are available for inspection at the Department of Labor in Washington, D.C. Copies of such reports may be obtained upon request and upon payment of copying costs from the following address:

The following information is provided pursuant to § 304(d)(3) of ERISA and § 431(d)(3) of the Code:

[SIGNATURE OF AUTHORIZED TRUSTEE OF THE APPLICANT BOARD]

1. To be completed by the person submitting comments to the IRS:

Submitter's Name and Address:

[INSERT PLAN NAME]

2. To be completed by IRS:

Date your comments were received:

IS YOUR SUBMISSION COMPLETE?

Instructions

The Service will be able to respond more quickly to your application for an alternative extension of an amortization period if it is carefully prepared and complete. To ensure your application is in order, use this checklist. Answer each question in the checklist by inserting Y for yes, N for no, or N/A for not applicable, as appropriate, in the blank next to the item. Sign and date the checklist (as applicant or authorized representative) and place it on top of your application.

You must submit a completed copy of this checklist with your application. If a completed checklist is not submitted with your application, substantive consideration of your submission will be deferred until a completed checklist is received.

__________ 1. If you want to designate an authorized representative, have you included a properly executed Form 2848 (Power of Attorney and Declaration of Representative)?

__________ 2. Have you satisfied all the requirements of Rev. Proc. 2010-4 (especially concerning signatures and penalties of perjury statement)? (See § 3.04(1))

__________ 3. Have you included a statement of proposed deletions? (See § 3.04(2))

__________ 4. Have you included the user fee required under Rev. Proc. 2010-8? (See § 3.02)

__________ 5. Have you included a copy of the written notice that an application for an extension of an amortization period is being submitted, a statement that such notice was delivered to each affected party, and a description of the method used to satisfy the notice requirement? (See § 3.03 and Appendix A)

__________ 6. Have you included the general facts concerning the participating employers? (See § 5.01(1))

__________ 7. Have you included a description of the industry's financial state? (See § 5.01(1))

__________ 8. Have you included information concerning the extension of the amortization period, including coordination with any extension under § 431(b)(8)(A)(i) of the Code ? (See § 5.01(3))

__________ 9. Have you included information concerning the pension plan? (See § 5.01(4))

__________ 10. Have you included information concerning other matters pertaining to the plan? (See § 5.01(5))

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