NPRM Suspension of Benefits Under MPRA

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For the reasons discussed above, I
certify this proposed regulation:
(1) Is not a ‘‘significant regulatory
action’’ under Executive Order 12866,
(2) Is not a ‘‘significant rule’’ under
the DOT Regulatory Policies and
Procedures (44 FR 11034, February 26,
1979),
(3) Will not affect intrastate aviation
in Alaska to the extent that it justifies
making a regulatory distinction, and
(4) Will not have a significant
economic impact, positive or negative,
on a substantial number of small entities
under the criteria of the Regulatory
Flexibility Act.
List of Subjects in 14 CFR Part 39
Air transportation, Aircraft, Aviation
safety, Incorporation by reference,
Safety.
The Proposed Amendment
Accordingly, under the authority
delegated to me by the Administrator,
the FAA proposes to amend 14 CFR part
39 as follows:
PART 39—AIRWORTHINESS
DIRECTIVES
1. The authority citation for part 39
continues to read as follows:

■

Authority: 49 U.S.C. 106(g), 40113, 44701.
§ 39.13

[Amended]

2. The FAA amends § 39.13 by adding
the following new airworthiness
directive (AD):

■

Pratt & Whitney Canada Corp.: Docket No.
FAA–2015–0486; Directorate Identifier
2015–NE–07–AD.
(a) Comments Due Date
We must receive comments by August 18,
2015.
(b) Affected ADs
None.

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(c) Applicability
This AD applies to Pratt & Whitney Canada
Corp. (P&WC) PT6B–37A turboshaft engines
with engine serial numbers identified in
Table 1 of paragraph 4, Appendix, in P&WC
Service Bulletin (SB) No. PT6B–72–39095,
Revision No. 3, dated December 29, 2014.
(d) Reason
This AD was prompted by reports of
incorrect engine torque for PT6B–37A
turboshaft engines. We are issuing this AD to
prevent axial migration of the No. 10 bearing
in the engine reduction gearbox (RGB)
assembly, which could lead to engine
overtorque, failure of the engine, in-flight
shutdown, and loss of the rotorcraft.
(e) Actions and Compliance
Comply with this AD within the
compliance times specified, unless already
done.

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17:44 Jun 18, 2015

Jkt 235001

(1) Initial Inspection
(i) Within 50 flight hours (FHs) time in
service after the effective date of this AD,
inspect the No. 10 bearing, part number
(P/N) 3310433–03, in the RGB assembly for
axial movement. Use paragraphs 3.A. to 3.C.
in the Accomplishment Instructions in
P&WC SB No. PT6B–72–39095, Revision No.
3, dated December 29, 2014, to do the
inspection. If the bearing fails the inspection,
replace the No. 9 and No. 10 bearings before
further flight.
(2) Repetitive Inspection
(i) For engines with 500 FHs or less total
time since new (TSN), repeat the inspection
required by paragraph (e)(1) of this AD every
100 FHs time since last inspection (TSLI)
until 500 hours total TSN, and, thereafter,
every 200 FHs TSLI until removal.
(ii) For engines with more than 500 FHs
total TSN perform the inspection required by
paragraph (e)(1) to this AD within 200 FHs
TSLI, and, thereafter, every 200 FHs TSLI
until removal.
(3) Removal and Replacement of Affected
Bearings
(i) For engine serial numbers (S/Ns) PCE–
PU0192, PU0193, PU0201, PU0208, PU0209,
PU0212, PU0213, PU0214, PU0216, PU0219,
and PU0220, remove the No. 9 and No. 10
bearings, P/N 3310433–03, within 450 FHs or
42 months after the effective date of this AD,
whichever occurs first, and replace with
parts eligible for installation.
(ii) For all engine S/Ns identified in
Applicability paragraph (c) of this AD, other
than those listed in paragraph (e)(3)(i) of this
AD, remove the No. 9 and No. 10 bearings,
P/N 3310433–03, and replace with parts
eligible for installation within 42 months
after the effective date of this AD.
(iii) Replacement of the No. 9 and No. 10
bearing, P/N 3310433–03, with the No. 9 and
No. 10 bearing, P/N 3310233–03 or P/N
3310533–03, is terminating action for this
AD.
(f) Reporting Requirements
You do not have to contact your Local
Field Service Representative as discussed in
paragraph 3.C.(3) of P&WC SB No. PT6B–72–
39095, Revision No. 3, dated December 29,
2014.
(g) Credit for Previous Action
If you previously replaced the No. 9 and
No. 10 bearings in accordance with the
instructions contained in P&WC SB No.
PT6B–72–39092, Revision No. 2, dated
August 8, 2014, or earlier revisions, then you
have complied with this AD.
(h) Alternative Methods of Compliance
(AMOCs)
The Manager, Engine Certification Office,
FAA, may approve AMOCs for this AD. Use
the procedures found in 14 CFR 39.19 to
make your request. You may email your
request to: [email protected].
(i) Related Information
(1) For more information about this AD,
contact Barbara Caufield, Aerospace
Engineer, Engine Certification Office, FAA,
Engine & Propeller Directorate, 12 New

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England Executive Park, Burlington, MA
01803; phone: 781–238–7146; fax: 781–238–
7199; email: [email protected].
(2) Refer to MCAI Transport Canada AD
CF–2015–01, dated January 20, 2015, for
more information. You may examine the
MCAI in the AD docket on the Internet at
http://www.regulations.gov by searching for
and locating it in Docket No. FAA–2015–
0486.
(3) P&WC SB No. PT6B–72–39092,
Revision No. 4, dated December 29, 2014,
and SB No. PT6B–72–39095, Revision No. 3,
dated December 29, 2014, can be obtained
from P&WC using the contact information in
paragraph (i)(4) of this proposed AD.
(4) For service information identified in
this proposed AD, contact Pratt & Whitney
Canada Corp., 1000 Marie-Victorin,
Longueuil, Quebec, Canada, J4G 1A1; phone:
800–268–8000; fax: 450–647–2888; Internet:
www.pwc.ca.
(5) You may view this service information
at the FAA, Engine & Propeller Directorate,
12 New England Executive Park, Burlington,
MA. For information on the availability of
this material at the FAA, call 781–238–7125.
Issued in Burlington, Massachusetts, on
June 10, 2015.
Ann C. Mollica,
Acting Directorate Manager, Engine &
Propeller Directorate, Aircraft Certification
Service.
[FR Doc. 2015–14986 Filed 6–18–15; 8:45 am]
BILLING CODE 4910–13–P

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG–102648–15]
RIN 1545–BM66

Suspension of Benefits Under the
Multiemployer Pension Reform Act of
2014
Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking,
notice of proposed rulemaking by crossreference to temporary regulations, and
notice of public hearing.
AGENCY:

This document contains
proposed regulations relating to
multiemployer pension plans that are
projected to have insufficient funds, at
some point in the future, to pay the full
benefits to which individuals will be
entitled under the plans (referred to as
plans in ‘‘critical and declining status’’).
The Multiemployer Pension Reform Act
of 2014 (‘‘MPRA’’) amended the Internal
Revenue Code to incorporate
suspension of benefits provisions that
permit these multiemployer plans to
reduce pension benefits payable to
participants and beneficiaries if certain

SUMMARY:

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conditions are satisfied. MPRA requires
the Secretary of the Treasury, in
consultation with the Pension Benefit
Guaranty Corporation and the Secretary
of Labor, to approve or deny
applications by these plans to reduce
benefits. As required by MPRA, these
proposed regulations, together with
temporary regulations being published
at the same time, provide guidance
implementing these statutory
provisions. These proposed regulations
would affect active, retired, and
deferred vested participants and
beneficiaries of multiemployer plans
that are in critical and declining status
as well as employers contributing to,
and sponsors and administrators of,
those plans.
DATES: Comments must be received by
August 18, 2015. Outlines of topics to be
discussed at the public hearing
scheduled for September 10, 2015 must
be received by August 18, 2015.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–102648–15), 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–102648–
15), 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–
102648–15). The public hearing will be
held in the Amphitheater of the Ronald
Reagan Building and International
Trade Center, 1300 Pennsylvania Ave.
NW., Washington, DC.
FOR FURTHER INFORMATION CONTACT:
Concerning the regulations, the
Department of the Treasury MPRA
guidance information line at (202) 622–
1559; concerning submission of
comments or the hearing, Regina
Johnson at (202) 317–6901 (not toll-free
numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information
contained in this notice of proposed
rulemaking has been submitted to the
Office of Management and Budget for
review in accordance with the
Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)).
The collection of information in the
paragraphs of these proposed
regulations that cross-reference the
temporary regulations that are being
published elsewhere in this issue of the
Federal Register is required for a
multiemployer defined benefit plan in
critical and declining status to satisfy

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the criteria for approval of an
application for a suspension of benefits,
including providing notice of the
application to specified individuals
(containing an individualized estimate
of the size of the benefit suspension)
and other interested parties. The
collection is also required for a plan
sponsor to obtain approval of the ballot
for the vote on the suspension of
benefits that follows approval of the
application.
The collection of information in the
paragraphs of these proposed
regulations that do not cross-reference
the temporary regulations is required for
a multiemployer defined benefit plan in
critical and declining status to maintain
an annual written record of its
determinations that all reasonable
measures to avoid insolvency have been
taken and that the plan is not projected
to avoid insolvency without a
suspension of benefits.
Comments on the collection of
information should be sent to the Office
of Management and Budget, Attn: Desk
Officer for the Department of the
Treasury, Office of Information and
Regulatory Affairs, Washington, DC
20503, with copies to the Internal
Revenue Service, Attn: IRS Reports
Clearance Officer,
SE:W:CAR:MP:T:T:SP, Washington, DC
20224. Comments on the collection of
information should be received by
August 18, 2015. Comments are
specifically requested concerning:
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the IRS,
including whether the information will
have practical utility;
The accuracy of the estimated burden
associated with the proposed collection
of information;
How the quality, utility, and clarity of
the information to be collected may be
enhanced;
How the burden of complying with
the proposed collections of information
may be minimized, including through
the application of automated collection
techniques or other forms of information
technology; and
Estimates of capital or start-up costs
and costs of operation, maintenance,
and purchase of service to provide
information.
For the paragraphs of the proposed
regulations that cross-reference the
temporary regulations:
Estimated total average annual
reporting or recordkeeping burden:
13,888 hours.
Estimated average annual burden per
recordkeeper: 496 hours.
Estimated number of recordkeepers:
28.

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For the paragraphs of the proposed
regulations that do not cross-reference
the temporary regulations:
Estimated total average annual
reporting or recordkeeping burden: 140
hours.
Estimated average annual burden per
recordkeeper: 5 hours.
Estimated number of recordkeepers:
28.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a valid control
number assigned by the Office of
Management and Budget.
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.
Background
Section 432(e)(9) 1 of the Internal
Revenue Code (Code) permits the plan
sponsor of a multiemployer plan that is
projected to have insufficient funds, at
some point in the future, to pay the full
benefits to which individuals will be
entitled under the plan (referred to as a
plan in ‘‘critical and declining status’’)
to reduce the pension benefits payable
to participants and beneficiaries under
the plan if certain conditions are
satisfied (referred to as a ‘‘suspension of
benefits’’). MPRA requires the Secretary
of the Treasury, in consultation with the
Pension Benefit Guaranty Corporation
(PBGC) and the Secretary of Labor
(generally referred to in this preamble as
the Treasury Department, PBGC, and
Labor Department, respectively), to
issue appropriate guidance to
implement the provisions of section
432(e)(9). This document contains
proposed regulations under section
432(e)(9) that, together with temporary
regulations that are being published
elsewhere in this issue of the Federal
Register and a revenue procedure being
published in the Internal Revenue
Bulletin, Rev. Proc. 2015–34, implement
section 432(e)(9), as required by the
statute. The Treasury Department
consulted with the PBGC and the Labor
Department on these proposed
regulations.
The temporary regulations, which are
applicable immediately, provide
1 Section 432(e)(9) was added to the Internal
Revenue Code by the Pension Protection Act of
2006, Public Law 109–280 (120 Stat. 780 (2006))
(PPA ’06) and amended by 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).

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sufficient guidance to enable a plan
sponsor that wishes to apply for
approval of a suspension of benefits to
prepare and submit such an application,
and to enable the Department of the
Treasury to begin the processing of such
an application. The temporary
regulations provide general guidance
regarding section 432(e)(9), including
guidance regarding the meaning of the
term ‘‘suspension of benefits,’’ the
general conditions for a suspension of
benefits, and the implementation of a
suspension after a participant vote. This
notice of proposed rulemaking requests
comments on the provisions of the
temporary regulations, and the
provisions of the temporary regulations
and proposed regulations are expected
to be integrated and issued as a single
set of final regulations with any changes
that are made following consideration of
the comments.
The proposed regulations included in
this document are not applicable
immediately. The proposed regulations
provide additional guidance regarding
section 432(e)(9), including guidance
relating to the standards that will be
applied in reviewing an application for
suspension of benefits and the statutory
limitations on a suspension of benefits.
For further background on the statutory
provisions that these proposed
regulations and the temporary
regulations that are incorporated by
cross-reference into these proposed
regulations are designed to implement,
see the preamble to the temporary
regulations in the Rules and Regulations
section of this issue of the Federal
Register.
The regulations implementing the
statutory suspension of benefits
provisions have been divided, as
described, into proposed regulations
and temporary regulations in order to
balance the interest in considering
public comments on rules before they
apply with the evident statutory intent,
reflected in MPRA, to implement the
statutory provisions without undue
delay. Although the Treasury
Department has issued proposed and
temporary regulations under section
432(e)(9), it is expected that no
application proposing a benefit
suspension will be approved prior to the
issuance of final regulations. If a plan
sponsor chooses to submit an
application for approval of a proposed
benefit suspension in accordance with
the proposed and temporary regulations
before the issuance of final regulations,
then the plan sponsor may need to
revise the proposed suspension (and
potentially the related notices to plan
participants) or supplement the
application to take into account any

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differences in the requirements relating
to suspensions of benefits that might be
included in the final regulations.
Rev. Proc. 2015–34 prescribes the
specifics of the application process for
approval of a proposed benefit
suspension. The revenue procedure also
provides a model notice that a plan
sponsor proposing a benefit suspension
may use to satisfy the statutory notice
requirement.
Conditions for Suspensions
As a condition for suspension of
benefits, the statute requires a plan
sponsor to determine, in a written
record to be maintained throughout the
period of the benefit suspension, that
although all reasonable measures to
avoid insolvency have been taken (and
continue to be taken during the period
of the benefit suspension), the plan is
still projected to become insolvent
unless benefits are suspended. In
making this determination, the plan
sponsor may take into account factors
including a specified list of 10 statutory
factors.2 See section 432(e)(9)(C)(ii).
Limitations on Suspensions
Section 432(e)(9)(D) contains
limitations on the benefits that may be
suspended, some of which apply to plan
participants and beneficiaries on an
individual basis and some of which
apply on an aggregate basis. Under the
statute, an individual’s monthly benefit
may not be reduced below 110 percent
of the monthly benefit that is guaranteed
by the PBGC under section 4022A of the
Employee Retirement Income Security
Act of 1974, Public Law 93–406 (88 Stat.
829 (1974)), as amended (ERISA) on the
date of the suspension. In addition, no
benefits based on disability (as defined
under the plan) may be suspended.
In the case of a participant or
beneficiary who has attained age 75 as
of the effective date of a suspension, the
statute provides that the suspension
may not exceed the applicable
percentage of the individual’s maximum
suspendable benefit (the age-based
limitation). The maximum suspendable
2 These 10 factors are current and past
contribution levels; levels of benefit accruals
(including prior reductions in the rate of benefit
accruals); prior adjustable benefit reductions and
suspensions of benefits; the impact on plan
solvency of the subsidies and ancillary benefits
available to active participants; compensation levels
of active participants relative to employees in the
participants’ industry generally; competitive and
other economic factors facing contributing
employers; the impact of benefit and contribution
levels on retaining active participants and
bargaining groups under the plan; the impact of
past and anticipated contribution increases under
the plan on employer attrition and retention levels;
and measures undertaken by the plan sponsor to
retain or attract contributing employers.

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benefit is the maximum amount of an
individual’s benefit that would be
suspended without regard to the agebased limitation. The applicable
percentage is a percentage that is
determined by dividing (i) the number
of months during the period that begins
with the month after the month in
which the suspension is effective and
ends with the month in which that
participant or beneficiary attains the age
of 80 by (ii) 60 months.
Section 432(e)(9)(D) also requires the
aggregate benefit suspensions
(considered, if applicable, in connection
with a plan partition under section 4233
of ERISA (partition)) to be reasonably
estimated to achieve, but not materially
exceed, the level that is needed to avoid
insolvency.
Under the statute, any suspension of
benefits must be equitably distributed
across the participant and beneficiary
population, taking into account factors
that may include one or more of a list
of 11 statutory factors.3 See section
432(e)(9)(D)(vi). Finally, with regard to
a suspension of benefits that is made in
combination with a plan partition, the
suspension may not occur before the
effective date of the partition.
Benefit Improvements
Section 432(e)(9)(E) sets forth rules
relating to benefit improvements made
while a suspension of benefits is in
effect. Under this provision, a benefit
improvement is defined as a resumption
of suspended benefits, an increase in
benefits, an increase in the rate at which
benefits accrue, or an increase in the
rate at which benefits become
nonforfeitable under the plan.
The statute also provides that, while
a suspension of benefits is in effect, a
plan sponsor generally has discretion to
provide benefit improvements.
However, a sponsor may not increase
plan liabilities by reason of any benefit
improvement for any participant or
beneficiary who is not in pay status (in
other words, those who are not yet
receiving benefits, such as active
employees or deferred vested
employees) unless (1) this benefit
improvement is accompanied by an
equitable distribution of benefit
improvements for those who have begun
3 These 11 factors are age and life expectancy;
length of time in pay status; amount of benefit; type
of benefit; extent of a subsidized benefit; extent of
post-retirement benefit increases; history of benefit
increases and reductions; years to retirement for
active employees; any discrepancies between active
employees and retirees; extent to which
participants are reasonably likely to withdraw
support for the plan, resulting in accelerated
employer withdrawal; and the extent to which the
benefits are attributed to service with an employer
that failed to pay its withdrawal liability.

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to receive benefits (typically, retirees),
and (2) the plan actuary certifies that,
after taking those benefit improvements
into account, the plan is projected to
avoid insolvency indefinitely.4 Whether
an individual is in pay status for this
purpose is generally based on whether
the individual’s benefits began before
the first day of the plan year for which
the benefit improvement took effect.
In order for benefit improvements to
be equitably distributed, the projected
value of the total liabilities attributable
to benefit improvements for participants
and beneficiaries who are not in pay
status may not exceed the projected
value of the liabilities attributable to
benefit improvements for participants
and beneficiaries who are in pay status.
See section 432(e)(9)(E)(ii). The plan
sponsor must equitably distribute any
increase in total liabilities attributable to
the benefit improvements among the
participants and beneficiaries who are
in pay status, taking into account the
factors relevant to the equitable
distribution of benefit suspensions
among participants and beneficiaries
(described in section 432(e)(9)(D)(vi))
and the extent to which their benefits
were suspended.
The statute allows a plan sponsor to
increase plan liabilities through a
resumption of benefits for participants
and beneficiaries in pay status without
providing any benefit improvements for
those who are not yet in pay status, but
only if it equitably distributes the value
of resumed benefits among participants
and beneficiaries in pay status, taking
into account the factors relevant to the
equitable distribution of benefit
suspensions.
The restrictions on benefit
improvements in section 432(e)(9)(E)
apply in addition to any other
applicable limitations on increases in
benefits that apply to a plan, except
with respect to resumptions of
suspended benefits only for participants
and beneficiaries in pay status
(described in the preceding sentence).

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Suspension Applications
Section 432(e)(9)(G) describes the
process for approval or rejection of a
plan sponsor’s application for a
suspension of benefits. Under the
4 Avoidance of insolvency is determined by
reference to section 418E under which a plan is
insolvent if it is unable to pay scheduled benefits
for a year. Pursuant to section 432(e)(9)(E)(iv), this
restriction does not apply to certain benefit
improvements if the Treasury Department
determines either that the benefit improvements are
reasonable and provide for only de minimis
increases in plan liabilities or that the benefit
improvements are required as a condition of
qualification or to comply with other applicable
law.

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statute, the Treasury Department, in
consultation with the PBGC and the
Labor Department, must approve an
application upon finding that the plan
is eligible for the suspensions and has
satisfied the criteria of sections
432(e)(9)(C), (D), (E), and (F). In
evaluating whether a plan sponsor has
met the criteria in section
432(e)(9)(C)(ii) (a plan sponsor’s
determination that, although all
reasonable measures have been taken,
the plan will become insolvent if
benefits are not suspended), the plan
sponsor’s consideration of factors under
that clause must be reviewed. The
statute also requires that the plan
sponsor’s determinations in an
application for a suspension of benefits
be accepted unless they are clearly
erroneous.
Participant Vote on Proposed Benefit
Reduction
If a suspension application is
approved, the proposed suspension then
goes to a vote of plan participants and
beneficiaries. See section 432(e)(9)(H).
The vote will be administered by the
Treasury Department, in consultation
with the PBGC and the Labor
Department, within 30 days after
approval of the suspension application.
The plan sponsor is required to provide
a ballot for a vote (subject to approval
by the Treasury Department, in
consultation with the PBGC and the
Labor Department). The statute specifies
information that the ballot must
include.5 If a majority of plan
participants and beneficiaries do not
vote to reject the suspension, the statute
requires the Treasury Department to
issue a final authorization to suspend
benefits within seven days after the
vote.
Explanation of Provisions
I. Overview
These proposed regulations provide
guidance on certain requirements under
section 432(e)(9) regarding suspension
of benefits for multiemployer defined
benefit plans in critical and declining
status. The proposed regulations cross5 This information includes a statement from the
plan sponsor in support of the suspension; a
statement in opposition to the suspension compiled
from comments received in response to the Federal
Register notice issued by Treasury within 30 days
of receiving the suspension application; a statement
that the suspension has been approved by the
Secretary of the Treasury, in consultation with the
PBGC and the Secretary of Labor; a statement that
the plan sponsor has determined that the plan will
become insolvent unless the suspension takes
effect; a statement that insolvency of the plan could
result in benefits lower than benefits paid under the
suspension; and a statement that insolvency of the
PBGC would result in benefits lower than benefits
otherwise paid in the case of plan insolvency.

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reference certain requirements that are
addressed in the temporary regulations
issued in the Rules and Regulations
section of this issue of the Federal
Register. In addition to the proposed
and temporary regulations, the
procedural requirements for submitting
an application to suspend benefits, as
well as a model notice, are provided in
Rev. Proc. 2015–34.
II. General Rules on Suspension of
Benefits
Under the temporary regulations,
once a plan is amended to suspend
benefits, a plan may pay or continue to
pay a reduced level of benefits pursuant
to the suspension only if the terms of
the plan are consistent with the
requirements of section 432(e)(9) and
the regulations. The proposed
regulations would provide that a plan’s
terms are consistent with the
requirements of section 432(e)(9) even if
they provide that, instead of a
suspension of benefits occurring in full
on a specified effective date, the amount
of a suspension will phase in or
otherwise change in a definite, predetermined manner as of a specified
future effective date or dates. However,
the proposed regulations would provide
that a plan’s terms are inconsistent with
the statutory requirements if they
provide that the amount of a suspension
will change contingent upon the
occurrence of any other specified future
event, condition, or development. For
example, a plan is not permitted to
provide that an additional or larger
suspension of benefits is triggered if the
plan’s funded status deteriorates.
Similarly, a plan is not permitted to
provide that, contingent upon a
specified future event, condition, or
development, a suspension of benefits
will be automatically reduced (except
upon a failure to satisfy the annual
requirement, described in the proposed
regulations, that the plan sponsor
determine that the plan is projected to
become insolvent unless benefits are
suspended).
In the case of an individual who has
commenced benefits, the proposed
regulations provide that the effective
date of a suspension of benefits is the
first date as of which a portion of the
individual’s benefits are not paid as a
result of the suspension. In the case of
an individual who has not yet
commenced benefits, the effective date
of a suspension of benefits is the first
date as of which the participant’s
accrued benefit is reduced as a result of
the suspension. The effective date of a
suspension may not precede the date on
which a final authorization to suspend
benefits is issued.

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If a suspension of benefits provides
for more than one reduction in benefits
over time, such that benefits are
scheduled to be reduced by an
additional amount after benefits are first
reduced pursuant to the suspension,
then each date as of which benefits are
reduced is treated as a separate effective
date of the suspension, which would
require, for example, that the age-based
limitation be separately applied as of
each effective date. However, if the
effective date of the final scheduled
reduction in benefits in a series of
reductions pursuant to a suspension is
less than three years after the effective
date of the first reduction, the effective
date of the first reduction will be treated
as the effective date of all subsequent
reductions pursuant to that suspension.
For example, if a suspension provides
that benefits will be reduced by a
specified percentage effective January 1,
2017, by an additional percentage
effective January 1, 2018, and by an
additional percentage effective January
1, 2019, with no subsequent changes
scheduled, it would meet the three-year
condition to treat January 1, 2017 as the
effective date for all three reductions.
However, if the suspension provided for
a further reduction effective January 1,
2020, the suspension would not be
treated as satisfying the three-year
condition and therefore would be
treated under the proposed regulations
as having four separate effective dates.
III. Conditions for Suspensions
The regulations provide that a plan
may not suspend benefits unless the
plan sponsor makes initial and annual
determinations that the plan is projected
to become insolvent unless benefits are
suspended, although all reasonable
measures to avoid insolvency have been
taken. These determinations are based
on the nonexclusive list of factors
described in section 432(e)(9)(C)(ii).
Under the proposed regulations, a
plan sponsor satisfies the annual-plansponsor determinations requirement for
a plan year only if the plan sponsor
determines, no later than the last day of
the plan year, that (1) all reasonable
measures to avoid insolvency have been
taken, and (2) the plan is projected to
become insolvent unless the suspension
of benefits continues (or another
suspension of benefits under section
432(e)(9) is implemented) for the plan.
For this purpose, the projection of the
plan’s insolvency must be made using
the standards that apply for purposes of
determining whether a suspension is
sufficient to avoid insolvency and not
materially in excess of the level needed
to avoid insolvency that are described in
paragraph IV.B.1 of this preamble.

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If there is favorable actuarial
experience so that the plan could avoid
insolvency even if the benefit
suspension were reduced (but not
eliminated), the plan sponsor may wish
to adopt a benefit increase that partially
restores suspended benefits in order to
share that favorable experience with the
participants. The statute contemplates
this circumstance by providing in
section 432(e)(9)(E) the requirements for
such a partial restoration of suspended
benefits and for other benefit
improvements. Moreover, if favorable
actuarial experience would allow the
plan to avoid insolvency if the benefit
suspension were eliminated entirely,
the proposed regulations would require
the plan sponsor to eliminate the
suspension.
The proposed regulations provide
that, in order to satisfy the annual-plansponsor determinations requirement,
the plan sponsor must maintain a
written record of its annual
determinations. The written record must
be included in an update to the
rehabilitation plan, whether or not there
is otherwise an update for that year or,
if the plan is no longer in critical status,
in the documents under which the plain
is maintained (so that it is available to
plan participants and beneficiaries). The
plan sponsor’s consideration of factors
required for its determination of
whether all reasonable measures have
been taken must be reflected in that
determination.
If a plan sponsor fails to satisfy the
annual-plan-sponsor determinations
requirement for a plan year (including
maintaining the written record), then
the suspension of benefits expires as of
the first day of the next plan year. For
example, if in a plan year the plan
sponsor is unable to determine that all
reasonable measures to avoid
insolvency have been taken, then the
plan sponsor must take those additional
reasonable measures before the end of
the plan year in order to avoid the
expiration of the suspension as of the
first day of the next plan year.
IV. Limitations on Suspensions
The proposed and temporary
regulations reflect the individual and
aggregate limitations on a suspension of
benefits under section 432(e)(9)(D).6 The
temporary regulations provide that after
applying the individual limitations, the
overall size and distribution of the
suspension is subject to the aggregate
limitations.
6 The

temporary regulations refer to section
432(e)(9)(D)(vii) for additional rules applicable to
certain plans.

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A. Individual Limitations
1. Guarantee-Based Limitation
The temporary regulations provide
that benefits may not be suspended
below 110 percent of the monthly
benefit payable to a participant,
beneficiaries, or alternate payee that
would be guaranteed by the PBGC under
section 4022A of ERISA if the plan were
to become insolvent as of the effective
date of the suspension.
The proposed regulations provide that
under section 4022A of ERISA, the
monthly benefit of a participant or
beneficiary that would be guaranteed by
the PBGC with respect to a plan if the
plan were to become insolvent as of the
effective date of the suspension is
generally based on section 4022A(c)(1)
of ERISA. Under section 4022A(c)(1) of
ERISA, that guaranteed amount is a
dollar amount multiplied by the
participant’s years and months of
credited service as of the date as of
which the guarantee is determined. The
dollar amount is 100 percent of the
accrual rate up to $11, plus 75 percent
of the lesser of (1) $33, or (2) the accrual
rate, if any, in excess of $11. The accrual
rate is a participant’s or beneficiary’s
monthly benefit (described in section
4022A(c)(2)(A) of ERISA) by the
participant’s years of credited service
(described in section 4022A(c)(3) of
ERISA) as of the effective date of the
suspension.
The proposed regulations provide a
number of examples of how the PBGC
guarantee is calculated. These examples
reflect the interpretation of section
4022A of ERISA provided by the PBGC.
In determining the participant’s
monthly benefit for purposes of the
accrual rate, only nonforfeitable benefits
(other than benefits that become
nonforfeitable on account of plan
termination) are taken into account,
pursuant to section 4022A(a) of ERISA.
The proposed regulations treat benefits
that are forfeitable on the effective date
of a suspension as nonforfeitable,
provided that the participant is in
covered employment on that date and
would have a nonforfeitable right to
those benefits upon completion of
vesting service following that date. For
example, if an active participant had
only three out of five years necessary for
the participant’s benefit to become 100
percent vested under a plan as of the
effective date of a suspension, the
participant’s accrued benefit will be
treated as 100 percent vested as of that
date.
2. Disability-Based Limitation
The temporary regulations
incorporate the statutory requirement

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that benefits based on disability may not
be suspended. For this purpose,
disability is defined in accordance with
the definition of that term in the plan.
The proposed regulations would
provide rules for implementing this
limitation.
The proposed regulations provide that
benefits based on disability means the
entire amount paid to a participant
pursuant to the participant becoming
disabled, regardless of whether a
portion of that amount would have been
paid if the participant had not become
disabled. For example, assume that a
participant with an accrued benefit of
$1,000 per month, payable at age 65,
becomes entitled under the plan to an
early retirement benefit at age 55 on
account of a disability (as defined in the
plan). Under the plan, the participant
(absent disability) would be entitled to
a reduced early retirement benefit of
$600 per month commencing at age 55,
but the reduction for early retirement
does not apply because the participant
became entitled to a benefit on account
of a disability. The participant’s
disability benefit payment of $1,000 per
month commencing at age 55 is a
benefit based on disability, even though
the participant would have received a
portion of these benefits at retirement
regardless of the disability.
The proposed regulations also provide
that if a participant begins receiving an
auxiliary or other temporary disability
benefit and the sole reason the
participant ceases receiving that benefit
is commencement of retirement
benefits, the benefit based on disability
after commencement of retirement
benefits is the lesser of (1) the periodic
payment the participant was receiving
immediately before the participant’s
retirement benefits commenced, or (2)
the total periodic payments to the
participant under the plan.
For example, assume that a
participant begins receiving a disability
pension of $1,000 per month payable at
age 55. When the participant reaches
age 65, the participant’s disability
pension is discontinued and the
participant elects to commence payment
of the participant’s accrued benefit in
the form of an actuarially equivalent
joint and survivor annuity payable in
the amount of $850 per month. Before
age 65, the participant’s benefit based
on disability is $1,000 per month. After
age 65, the participant’s benefit based
on disability is $850 per month.
(Alternatively, if the participant had
elected to commence payment of the
participant’s accrued benefit in the form
of a single life annuity payable in the
amount of $1,000 per month, the
participant’s benefit based on disability

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after age 65 would be $1,000 per
month.) A suspension of benefits is not
permitted to apply to any portion of
those benefits at any time.
3. Age-Based Limitation
The proposed regulations would
provide that no suspension of benefits is
permitted to apply to a participant,
beneficiary, or alternate payee who has
commenced receiving benefits as of the
effective date of the suspension and has
reached age 80 no later than the end of
the month that includes the effective
date of the suspension. For example,
assume that a suspension of benefits has
an effective date of December 1, 2017.
If a retiree is 79 years old on December
1, 2017, and turns 80 on December 15,
2017, a suspension of benefits is not
permitted to apply to the retiree’s
monthly benefit.
In addition, no more than the
applicable percentage of the maximum
suspendable benefit may be suspended
for a participant, beneficiary, or
alternate payee who has commenced
receiving benefits as of the effective date
of the suspension and has reached age
75 by the end of the month that includes
the effective date of the suspension.
The maximum suspendable benefit is
the portion of an individual’s benefits
that would be suspended without regard
to the age-based limitation, after the
application of the guarantee-based
limitation and the disability-based
limitation, described earlier in
paragraphs IV.A.1 and IV.A.2 of this
preamble.
The applicable percentage is the
percentage obtained by dividing: (1) The
number of months during the period
beginning with the month after the
month in which the suspension of
benefits is effective and ending with the
month during which the participant or
beneficiary attains the age of 80, by (2)
60.
The proposed regulations explain
how to apply the age-based limitation if
benefits have not commenced to either
a participant or beneficiary as of the
effective date of the suspension. If the
participant is alive on the effective date,
the participant is treated as having
commenced benefits on that date. If the
participant is deceased on the effective
date, the beneficiary is treated as having
commenced benefits on that date.
The age-based limitation applies to a
suspension of benefits in which an
alternate payee has an interest, whether
or not the alternate payee has
commenced benefits as of the effective
date of the suspension. If the alternate
payee’s right to the suspended benefits
derives from a qualified domestic
relations order within the meaning of

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section 414(p)(1)(A) (QDRO) under
which the alternate payee shares in each
benefit payment but the participant
retains the right to choose the time and
form of payment with respect to the
benefit to which the suspension applies
(shared payment QDRO), the applicable
percentage for the alternate payee is
calculated by using the participant’s age
as of the effective date of the
suspension. If the alternate payee’s right
to the suspended benefits derives from
a QDRO under which the alternate
payee has a separate right to receive a
portion of the participant’s retirement
benefit to be paid at a time and in a form
different from that chosen by the
participant (separate interest QDRO),
the applicable percentage for the
alternate payee is calculated by
substituting the alternate payee’s age as
of the effective date of the suspension
for the participant’s age.
If the age-based limitation applies to
a participant on the effective date of the
suspension, then the age-based
limitation also applies to the beneficiary
of the participant, based on the age of
the participant on the effective date of
the suspension.
B. Aggregate Limitations
1. Avoidance of Insolvency
The proposed regulations reflect the
requirement in section 432(e)(9)(D)(iv)
that any suspension of benefits, in the
aggregate (considered, if applicable, in
combination with a partition of the
plan), must be at a level that is
reasonably estimated to enable the plan
to avoid insolvency and not materially
exceed the level that is necessary to
enable the plan to avoid insolvency.
A suspension of benefits (considered,
if applicable, in combination with a
partition of the plan) will satisfy the
requirement that it is at a level that is
reasonably estimated to enable the plan
to avoid insolvency if: (1) For each plan
year throughout an extended period
beginning on the first day of the plan
year that includes the effective date of
the suspension, the plan’s solvency ratio
is projected on a deterministic basis to
be at least 1.0; (2) based on stochastic
projections reflecting variance in
investment return, the probability that
the plan will avoid insolvency
throughout the extended period is more
than 50 percent; and (3) unless the
plan’s projected funded percentage
(within the meaning of section 432(j)(2))
at the end of the extended period using
a deterministic projection exceeds 100
percent, then the projection shows that
at all times during the last five plan
years of that period, there is no
projected decrease in either the plan’s

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solvency ratio or its available resources
(as defined in section 418E(b)(3)). In the
case of a plan that is not large enough
to be required to select a retiree
representative, the determination of
whether a benefit suspension
(considered, if applicable, in
combination with a plan partition) will
satisfy the requirement that it is at a
level that is reasonably estimated to
enable the plan to avoid insolvency is
permitted to be made without regard to
clause (2).
A plan’s solvency ratio for a plan year
means the ratio of the plan’s available
resources (as defined in section
418E(b)(3)) for the plan year to the
scheduled benefit payments under the
plan for the plan year. An extended
period means a period of at least 30 plan
years. However, in the case of a
temporary suspension of benefits that is
scheduled to cease as of a date that is
more than 25 years after the effective
date of the suspension, the extended
period must be lengthened so that it
ends no earlier than five plan years after
the cessation of the suspension.
Under the proposed regulations, a
suspension of benefits will satisfy the
requirement that the suspension be at a
level that is reasonably estimated to not
materially exceed the level necessary for
the plan to avoid insolvency if an
alternative, similar but smaller
suspension of benefits, under which the
dollar amount of the suspension for
each participant and beneficiary were
reduced by five percent, would not be
sufficient to enable the plan to satisfy
the requirement that the suspension be
at a level that is reasonably estimated to
enable the plan to avoid insolvency. In
addition, if the PBGC issues an order
partitioning the plan, then a suspension
of benefits with respect to the plan will
be deemed to satisfy this requirement.
This test based on a five percent
reduction of a suspension is roughly
comparable to the common use in
accounting standards of a five-percent
threshold for materiality.
The proposed regulations would
require the actuarial projections used for
purposes of these requirements to reflect
the assumption that the suspension of
benefits continues indefinitely (or, if the
suspension expires on a specified date
by its own terms, until that date). The
actuarial assumptions and methods
used for the actuarial projections must
be reasonable in accordance with the
rules of section 431(c)(3). The actuary’s
selection of assumptions about future
covered employment and contribution
levels (including contribution base units
and average contribution rate) is
permitted to be based on information
provided by the plan sponsor, which

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must act in good faith in providing the
information. In addition, to the extent
that the actuarial assumptions used for
the projections differ from those used to
certify whether the plan is in critical
and declining status pursuant to section
432(b)(3)(B)(iv), a justification for that
difference generally must be provided.
The cash flow projections must be
based on the fair market value of assets
as of the end of the most recent calendar
quarter, projected benefit payments that
are consistent with the projected benefit
payments under the most recent
actuarial valuation, and appropriate
adjustments to projected benefit
payments to include benefits for new
hires who are reflected in the projected
contribution amounts. The projected
cash flows relating to contributions,
withdrawal liability payments, and
benefit payments must also be adjusted
to reflect significant events that
occurred after the most recent actuarial
valuation. Significant events include: (1)
A plan merger or transfer; (2) the
withdrawal or the addition of employers
that changed projected cash flows
relating to contributions, withdrawal
liability payments, or benefit payments
by more than five percent; (3) a plan
amendment, a change in a collective
bargaining agreement, or a change in a
rehabilitation plan that changed
projected cash flows relating to
contributions, withdrawal liability, or
benefit payments by more than five
percent; or (4) any other event or trend
that resulted in a material change in the
projected cash flows.
The application for suspension must
include a disclosure of the total
contributions, total contribution base
units and average contribution rate,
withdrawal liability payments, and the
rate of return on plan assets for each of
the 10 plan years preceding the plan
year in which the application is
submitted. In addition, the application
must include deterministic projections
of the plan’s solvency ratio over the
extended period using two alternative
assumptions that the plan’s future rate
of return was lower than the assumed
rate of return by (1) one percentage
point and (2) two percentage points.
The application must include
deterministic projections of the plan’s
solvency ratio over the extended period
using two alternative assumptions for
the future contribution base units. These
alternatives are that the future
contribution base units (1) continue
under the same trend as the plan
experienced over the past 10 years, and
(2) continue under that 10-year trend
reduced by one percentage point.
The application must include an
illustration, prepared on a deterministic

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basis, of the projected value of plan
assets, the accrued liability of the plan
(calculated using the unit credit funding
method), and the funded percentage for
each year in the extended period.
2. Equitable Distribution
The proposed regulations would
require any suspension of benefits to be
equitably distributed across the
participant and beneficiary population.
If a suspension of benefits applies
differently to different categories or
groups of participants and beneficiaries,
then the suspension of benefits is
equitably distributed across the
participant and beneficiary population
only if under the suspension: (1) Within
each such category or group, the
individuals are treated consistently; (2)
any difference in treatment among the
different categories or groups is based
on relevant factors reasonably selected
by the plan sponsor; and (3) any such
difference in treatment is based on a
reasonable application of the relevant
factors.
The proposed regulations contain
examples illustrating the equitable
distribution rules.
V. Benefit Improvements
The proposed regulations set forth
rules for the application of section
432(e)(9)(E), regarding benefit
improvements. The proposed
regulations provide that a plan satisfies
the criteria in section 432(e)(9)(E) only
if, during the period that any
suspension of benefits remains in effect,
the plan sponsor does not implement
any benefit improvement except as
provided in the proposed regulations.
Section 432(e)(9)(E)(vi) and the
proposed regulations define the term
benefit improvement to mean, with
respect to a plan, a resumption of
suspended benefits, an increase in
benefits, an increase in the rate at which
benefits accrue, or an increase in the
rate at which benefits become
nonforfeitable under the plan. In the
case of a suspension of benefits that
expires as of a date that is specified in
the original plan amendment providing
for the suspension, the resumption of
benefits solely from the expiration of
that period is not treated as a benefit
improvement.
A. Limitations on Benefit Improvements
for Those Not in Pay Status
The proposed regulations provide
that, during the period any suspension
of benefits under a plan remains in
effect, the plan sponsor may not
increase the liabilities of the plan by
reason of any benefit improvement for
any participant or beneficiary who was

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not in pay status for any plan year
before the plan year for which the
benefit improvement takes effect, unless
several conditions are satisfied.
One condition is that the present
value of the total liabilities for a benefit
improvement for participants and
beneficiaries whose benefit
commencement dates occurred before
the first day of the plan year for which
the benefit improvement takes effect is
not less than the present value of the
total liabilities for a benefit
improvement for participants and
beneficiaries who were not in pay status
by that date. For this purpose, present
value is the present value as of the first
day of the plan year in which the benefit
improvement is proposed to take effect,
using actuarial assumptions in
accordance with section 431.
The plan sponsor must also equitably
distribute the benefit improvement
among participants and beneficiaries
whose benefit commencement dates
occurred before the first day of the plan
year in which the benefit improvement
is proposed to take effect. The
evaluation of whether a benefit
improvement is equitably distributed
must take into account the factors
relevant to whether a suspension of
benefits is equitably distributed,
described in paragraph IV.B.2 of this
preamble, and the extent to which the
benefits of the participants and
beneficiaries were suspended.
In addition, the plan actuary must
certify that, after taking into account the
benefit improvement, the plan is
projected to avoid insolvency
indefinitely. This certification must be
made using the standards that apply for
purposes of determining whether a
suspension is sufficient to avoid
insolvency that are described in
paragraph IV.B.1 of this preamble.
These limitations do not apply to a
resumption of suspended benefits or
plan amendment that increases
liabilities with respect to participants
and beneficiaries not in pay status by
the first day of the plan year in which
the benefit improvement took effect
that: (1) The Treasury Department, in
consultation with the PBGC and the
Labor Department, determines to be
reasonable and which provides for only
de minimis increases in plan liabilities,
or (2) is required as a condition of
qualification under section 401 or to
comply with other applicable law, as
determined by the Treasury Department.
B. Limitations on Benefit Improvements
for Those in Pay Status
Under the proposed regulations, the
plan sponsor may increase liabilities of
the plan by eliminating some or all of

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the suspension that applies solely to
participants and beneficiaries in pay
status at the time of the resumption,
provided that the plan sponsor
equitably distributes the value of those
resumed benefits among participants
and beneficiaries in pay status, taking
into account factors relevant to whether
a suspension of benefits is equitably
distributed. Such a resumption of
benefits is not subject to the limitations
on a benefit improvement under section
432(f) (relating to restrictions on benefit
increases for plans in critical status).
C. Other Limitations on Benefit
Increases
The proposed regulations would
provide that the limitations on benefit
improvements generally apply in
addition to other limitations on benefit
increases that apply to a plan. Except for
a resumption of suspended benefits
described in paragraph V.B. of this
preamble, the limitations on a benefit
improvement are in addition to the
limitations in section 432(f) and any
other applicable limitations on increases
in benefits imposed on a plan.
VI. Notice of Proposed Suspension
Section 432(e)(9)(F)(iii) states that
notice must be provided in a form and
manner prescribed in guidance and that
notice may be provided in written,
electronic, or other appropriate form to
the extent such form is reasonably
accessible to persons to whom the
notice is required to be provided. The
temporary regulations include rules
implementing the statutory notice
requirements in section 432(e)(9)(F).
The proposed regulations would
provide that notice must exclusively be
provided in written or electronic form
(that is, there is no other appropriate
form).
VII. Approval or Denial of an
Application for Suspension of Benefits
A plan sponsor cannot implement a
suspension of benefits unless, among
other things, its application for a
proposed suspension of benefits is
approved. The temporary regulations
contain rules regarding the submission
and review of an application, and
related guidelines and procedures are
set forth in Rev. Proc. 2015–34. The
temporary regulations provide that a
complete application will be deemed
approved unless, within 225 days after
a complete application is received, the
Treasury Department notifies the plan
sponsor that its application does not
satisfy one or more of the requirements
for approval. The proposed regulations
would provide that, if necessary under
the circumstances, the Treasury

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Department and the plan sponsor may
mutually agree in writing to stay the
225-day period. Any such agreement
would be expected to be used only in
unusual circumstances.
As required by section
432(e)(9)(G)(iv), the proposed
regulations provide that in evaluating
whether the plan sponsor has satisfied
the condition (in section 432(e)(9)(C)(ii))
that it determine that all reasonable
measures to avoid insolvency within the
meaning of section 418E have been
taken, the Treasury Department, in
consultation with the PBGC and the
Labor Department, will review the plan
sponsor’s consideration of each of the
factors enumerated in section
432(e)(9)(C)(ii) and each other factor it
took into account in making that
determination. The proposed
regulations, like the statute, do not
require the plan sponsor to take any
particular measure or measures to avoid
insolvency but do require, in the
aggregate, that the plan sponsor take all
reasonable measures to avoid
insolvency. In accordance with section
432(e)(9)(G)(v), the proposed regulations
provide that, in evaluating the plan
sponsor’s application, the Treasury
Department will accept the plan
sponsor’s determinations under section
432(e)(9)(C)(ii) unless the Treasury
Department concludes, in consultation
with the PBGC and the Labor
Department, that the determinations
were clearly erroneous. This statutory
structure reflects the view that
particular measures to avoid insolvency
may be inappropriate for some plans
and requires the Treasury Department to
review the plan sponsor’s consideration
of the appropriateness of each of the
statutory factors, but recognizes that the
plan sponsor is generally in a better
position than the Treasury Department
to determine the most effective
measures that a particular plan should
take to avoid insolvency.
The proposed regulations provide that
an application to suspend benefits will
not be approved unless the plan sponsor
certifies that, if it receives final
authorization to suspend benefits
(described in paragraph VIII. of this
preamble), chooses to implement the
suspension, and adopts a plan
amendment to implement the
suspension, it will timely amend the
plan to provide that (1) the suspension
of benefits will cease as of the first day
of the first plan year following the first
plan year in which the plan sponsor
fails to make the annual determinations
in section 432(e)(9)(C)(ii); and (2) any
future benefit improvement must satisfy
the section 432(e)(9)(E) rules for benefit
improvements.

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VIII. Participant Vote on Proposed
Benefit Reduction
Section 432(e)(9)(H)(ii) provides that
if an application for a suspension of
benefits is approved, then the Treasury
Department, in consultation with the
PBGC and the Labor Department, will
administer a vote of all plan participants
and all beneficiaries of deceased
participants (eligible voters). Any
suspension of benefits will take effect
only after the vote and after a final
authorization to suspend benefits. Many
of the rules relating to the vote are set
forth in the temporary regulations.
However, both the temporary and the
proposed regulations reserve, for later
issuance, provisions on the
administration of the vote.
The proposed regulations would
provide that if an application for
suspension is approved, the plan
sponsor must take reasonable steps to
inform eligible voters about the
proposed suspension and the vote. This
includes all eligible voters who can be
contacted by reasonable efforts pursuant
to section 432(e)(9)(F). Anyone whom
the plan sponsor has been able to locate
through these means (or who has
otherwise been located by the plan
sponsor) must be sent a ballot.
The proposed regulations would
require the plan sponsor to provide a
ballot for the vote 7 that includes the
following:
• A description of the proposed
suspension and its effect, including the
effect of the suspension on each
category or group of individuals affected
by the suspension and the extent to
which they are affected;
• A description of the factors
considered by the plan sponsor in
designing the benefit suspension,
including but not limited to the factors
in section 432(e)(9)(D)(vi);
• A description of whether the
suspension will remain in effect
indefinitely or will expire by its own
terms (and, if it will expire by its own
terms, when that will occur);
• A statement from the plan sponsor
in support of the proposed suspension;
• A statement in opposition to the
proposed suspension compiled from
comments received pursuant to the
solicitation of comments in the Federal
Register notice with respect to the
application;
• A statement that the proposed
suspension has been approved by the
Secretary of the Treasury, in
7 The ballot is subject to approval by the Treasury
Department, in consultation with the PBGC and the
Labor Department. See section 432(e)(9)(H) and
§ 1.432(e)(9)–1T(h).

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consultation with the PBGC and the
Secretary of Labor;
• A statement that the plan sponsor
has determined that the plan will
become insolvent unless the proposed
suspension takes effect (including the
year in which insolvency is projected to
occur without a suspension of benefits),
and an accompanying statement that
this determination is subject to
uncertainty;
• A statement that insolvency of the
plan could result in benefits lower than
benefits paid under the proposed
suspension and a description of the
projected benefit payments in the event
of plan insolvency;
• A statement that insolvency of the
PBGC would result in benefits lower
than benefits otherwise paid in the case
of plan insolvency;
• A statement that the plan’s actuary
has certified that the plan is projected
to avoid insolvency, taking into account
the proposed suspension of benefits
(and, if applicable, a proposed partition
plan), and an accompanying statement
that the actuary’s projection is subject to
uncertainty;
• A statement that the suspension
will go into effect unless a majority of
eligible voters vote to reject the
suspension and that, therefore, a failure
to vote has the same effect on the
outcome of the vote as a vote in favor
of the suspension;
• A copy of the individualized
estimate that was provided as part of the
earlier notice described in section
432(e)(9)(F) (or, if that individualized
estimate is no longer accurate, a
corrected version of that estimate); and
• A description of the voting
procedures, including the deadline for
voting.
A proposed suspension is generally
permitted to be implemented unless
rejected by a majority vote of all eligible
voters. In determining whether a
majority of all eligible voters have voted
to reject the suspension under section
432(e)(9)(H)(ii), the proposed
regulations would treat any eligible
voters to whom ballots have not been
provided (because the individuals could
not be located) as voting to reject the
suspension at the same rate (in other
words, in the same percentage) as those
to whom ballots have been provided.
Proposed Effective Date
These regulations are proposed to be
effective on and after the date of
publication in the Federal Register of
the Treasury decision adopting these
rules as final regulations. Until
regulations finalizing these proposed
regulations are issued, taxpayers may

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not rely on the rules set forth in these
proposed regulations.
Availability of IRS Documents
For copies of recently issued revenue
procedures, revenue rulings, notices and
other guidance published in the Internal
Revenue Bulletin, please visit the IRS
Web site at http://www.irs.gov or contact
the Superintendent of Documents, U.S.
Government Printing Office,
Washington, DC 20402.
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 Treasury 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 will suspend benefits
under section 432(e)(9). 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 under the
ADDRESSES heading. The Treasury
Department and the IRS request
comments on all aspects of the proposed
rules (including both the provisions set
forth in this notice of proposed
rulemaking and the provisions set forth
in the cross-referenced temporary
regulations). Comments are specifically
requested on the demonstration of
avoidance of insolvency, including the
rules related to the use of the extended
period for this purpose. In addition,
comments are requested on the rules

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relating to the demonstration that the
suspension is not materially in excess of
the level necessary to avoid insolvency.
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
September 10, 2015, beginning at 9:00
a.m. in the Amphitheater of the Ronald
Reagan Building and International
Trade Center, 1300 Pennsylvania Ave.
NW., Washington, DC.
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 August 18, 2015, and an
outline of topics to be discussed and the
amount of time to be devoted to each
topic (a signed original and eight (8)
copies) by August 18, 2015. A period of
up to 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.
For information about the hearing, see
the FOR FURTHER INFORMATION CONTACT
section of this preamble.
Contact Information
For general questions regarding these
regulations, please contact the
Department of the Treasury at (202)
622–1559 (not a toll-free number). For
information regarding a specific
application for a suspension of benefits,
please contact the Department of the
Treasury at (202) 622–1534 (not a tollfree number).

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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
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:

■

Authority: 26 U.S.C. 7805 * * *

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Par. 2. Section 1.432(e)(9)–1 is added
to read as follows:

■

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

(a) General rules on suspension of
benefits—(1) General rule. [The text of
the proposed amendments to
§ 1.432(e)(9)–1(a)(1) is the same as
§ 1.432(e)(9)–1T(a)(1) published
elsewhere in this issue of the Federal
Register.]
(2) Adoption of plan terms
inconsistent with suspension
requirements—(i) General rule. [The text
of the proposed amendments to
§ 1.432(e)(9)–1(a)(2)(i) is the same as
§ 1.432(e)(9)–1T(a)(2)(i) published
elsewhere in this issue of the Federal
Register.]
(ii) Changes in level of suspension. A
plan’s terms are consistent with the
requirements of section 432(e)(9) even if
the plan provides that, instead of a
suspension of benefits occurring in full
on a specified effective date, the amount
of a suspension will phase in or
otherwise change in a definite, predetermined manner as of a specified
future effective date or dates. However,
a plan’s terms are inconsistent with the
requirements of section 432(e)(9) if they
provide that the amount of a suspension
will change contingent upon the
occurrence of any other specified future
event, condition, or development. For
example, a plan is not permitted to
provide that an additional or larger
suspension of benefits is triggered if the
plan’s funded status deteriorates.
Similarly, a plan is not permitted to
provide that, contingent upon a
specified future event, condition, or
development, a suspension of benefits
will be automatically reduced (except
upon a failure to satisfy the annual
requirement, described in paragraph
(c)(4) of this section, that the plan
sponsor make determinations that the
plan is projected to avoid insolvency
unless benefits are suspended).
(3) Organization of the regulation.
This paragraph (a) contains definitions
and general rules relating to a
suspension of benefits by a
multiemployer plan under section
432(e)(9). Paragraph (b) of this section
defines a suspension of benefits and
describes the length of a suspension, the
treatment of beneficiaries and alternate
payees under this section, and the
requirement to select a retiree
representative. Paragraph (c) of this
section contains rules for the actuarial
certification and plan-sponsor
determinations that must be made in
order for a plan to suspend benefits.
Paragraph (d) of this section describes

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limitations on suspensions of benefits.
Paragraph (e) of this section describes
limitations on benefit improvements
that may be made while a suspension of
benefits is in effect. Paragraph (f) of this
section describes the requirement to
provide notice in connection with an
application to suspend benefits.
Paragraph (g) of this section describes
the approval or denial of an application
for a suspension of benefits. Paragraph
(h) of this section contains certain rules
relating to the vote on an approved
suspension, systemically important
plans, and the issuance of a final
authorization to suspend benefits.
(4) Definitions. The following
definitions apply for purposes of this
section—(i) Pay status. [The text of the
proposed amendments to § 1.432(e)(9)–
1(a)(4)(i) is the same as § 1.432(e)(9)–
1T(a)(4)(i) published elsewhere in this
issue of the Federal Register.]
(ii) Plan sponsor. [The text of the
proposed amendments to § 1.432(e)(9)–
1(a)(4)(ii) is the same as § 1.432(e)(9)–
1T(a)(4)(ii) published elsewhere in this
issue of the Federal Register.]
(iii) Effective date of suspension of
benefits—(A) In general. In the case of
an individual who has commenced
benefits, the effective date of a
suspension of benefits is the first date as
of which a portion of the individual’s
benefits are not paid as a result of the
suspension. In the case of an individual
who has not yet commenced benefits,
the effective date of a suspension of
benefits is the first date as of which the
individual’s accrued benefit is reduced
as a result of the suspension.
(B) Phased-in suspension. If a
suspension of benefits provides for more
than one reduction in benefits over
time, such that benefits are scheduled to
be reduced by an additional amount
after benefits are first reduced pursuant
to the suspension, then each date as of
which benefits are reduced is treated as
a separate effective date of the
suspension. However, if the effective
date of the final scheduled reduction in
benefits in a series of reductions
pursuant to a suspension is less than
three years later than the effective date
of the first reduction, the effective date
of the first reduction will be treated as
the effective date of all subsequent
reductions pursuant to that suspension.
(C) Effective date may not be
retroactive. The effective date of a
suspension may not precede the date on
which a final authorization to suspend
benefits is issued pursuant to paragraph
(h)(6) of this section.
(b) Definition of suspension of
benefits and related rules. [The text of
the proposed amendments to
§ 1.432(e)(9)–1(b) is the same as

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§ 1.432(e)(9)–1T(b) published elsewhere
in this issue of the Federal Register.]
(c) Conditions for suspension—(1) In
general—(i) Actuarial certification and
initial-plan-sponsor determinations.
[The text of the proposed amendments
to § 1.432(e)(9)–1(c)(1)(i) is the same as
§ 1.432(e)(9)–1T(c)(1)(i) published
elsewhere in this issue of the Federal
Register.]
(ii) Annual requirement to make plansponsor determinations. As provided in
paragraph (c)(5) of this section, the
suspension will continue only if the
plan sponsor continues to make the
annual-plan-sponsor determinations
described in paragraph (c)(4) of this
section.
(2) Actuarial certification. [The text of
the proposed amendments to
§ 1.432(e)(9)–1(c)(2) is the same as
§ 1.432(e)(9)–1T(c)(2) published
elsewhere in this issue of the Federal
Register.]
(3) Initial-plan-sponsor
determinations. [The text of the
proposed amendments to § 1.432(e)(9)–
1(c)(3) is the same as § 1.432(e)(9)–
1T(c)(3) published elsewhere in this
issue of the Federal Register.]
(4) Annual-plan-sponsor
determinations—(i) General rule. A plan
satisfies the annual-plan-sponsor
determinations requirement of this
paragraph (c)(4) for a plan year only if
the plan sponsor determines, no later
than the last day of the plan year, that—
(A) All reasonable measures to avoid
insolvency have been and continue to
be taken; and
(B) The plan is not projected to avoid
insolvency (determined using the
standards described in paragraphs
(d)(5)(ii), (iv), and (v) of this section,
substituting the current plan year for the
plan year that includes the effective date
of the suspension) unless the
suspension of benefits continues (or
another suspension of benefits under
section 432(e)(9) is implemented) for the
plan.
(ii) Factors. In making its
determination that all reasonable
measures to avoid insolvency have been
and continue to be taken, the plan
sponsor may take into account the nonexclusive list of factors in paragraph
(c)(3)(ii) of this section.
(iii) Requirement to maintain written
record. The plan sponsor must maintain
a written record of the annual-plansponsor determinations made under this
paragraph (c)(4). The written record
must be included in an update to the
rehabilitation plan, whether or not there
is otherwise an update for that year (or,
if the plan is no longer in critical status,
must be included in the documents
under which the plain is maintained).

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The written record of the
determinations must describe the plan
sponsor’s consideration of factors, as
described in paragraph (c)(4)(ii) of this
section.
(5) Failure to make annual-plansponsor determinations. If a plan
sponsor fails to satisfy the annual-plansponsor determinations requirement of
paragraph (c)(4) of this section for a plan
year (including maintaining the written
record described in paragraph (c)(4)(iii)
of this section), then the suspension of
benefits will cease to be in effect
beginning as of the first day of the next
plan year.
(d) Limitations on suspension—(1) In
general. [The text of the proposed
amendments to § 1.432(e)(9)–1(d)(1) is
the same as § 1.432(e)(9)–1T(d)(1)
published elsewhere in this issue of the
Federal Register.]
(2) Guarantee-based limitation—(i)
General rule. [The text of the proposed
amendments to § 1.432(e)(9)–1(d)(2)(i) is
the same as § 1.432(e)(9)–1T(d)(2)(i)
published elsewhere in this issue of the
Federal Register.]
(ii) PBGC guarantee. Under section
4022A of the Employee Retirement
Income Security Act of 1974, Public
Law 93–406 (88 Stat. 829 (1974)), as
amended (ERISA), the monthly benefit
of a participant or beneficiary that
would be guaranteed by the Pension
Benefit Guaranty Corporation (PBGC)
with respect to a plan if the plan were
to become insolvent as of the effective
date of the suspension is generally
based on section 4022A(c)(1) of ERISA.
Under that section, the monthly benefit
that would be guaranteed if the plan
were to become insolvent as of the date
as of which the guarantee is determined
is the product of—
(A) 100 percent of the accrual rate up
to $11, plus 75 percent of the lesser of—
(1) $33; or
(2) The accrual rate, if any, in excess
of $11; and
(B) The number of the participant’s
years and months of credited service as
of that date.
(iii) Calculation of accrual rate. The
accrual rate, as defined in section
4022A(c)(2) of ERISA, is calculated by
dividing—
(A) The participant’s or beneficiary’s
monthly benefit, described in section
4022A(c)(2)(A) of ERISA; by
(B) The participant’s years of credited
service, described in section 4022A(c)(3)
of ERISA, as of the effective date of the
suspension.
(iv) Special rule for non-vested
participants. For purposes of this
paragraph (d)(2), a participant’s
nonforfeitable benefits under section
4022A(a) of ERISA include benefits that

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are forfeitable as of the effective date of
the suspension, provided that the
participant would have a nonforfeitable
right to those benefits if the participant
continued to earn vesting service
following that date.
(v) Examples. The following examples
illustrate the limitation on a suspension
of benefits in this paragraph (d)(2).
Unless otherwise stated, the amount of
guarantee payable by PBGC in these
examples is based on section 4022A(c)
of ERISA, and the rules under section
4022A(d) of ERISA (guarantee for
benefits reduced under section
411(a)(3)(E)), section 4022A(e) of ERISA
(benefits ineligible for guarantee), and
section 4022A(h) of ERISA (guarantee
for benefits accrued as of July 30, 1980)
do not apply. In these examples, unless
otherwise stated, the monthly benefits
are nonforfeitable, are based on benefits
that have been in effect for at least 60
months as of the effective date of the
suspension, and are no greater than the
monthly benefit that would be payable
at normal retirement age in the form of
a single life annuity.
Example 1. (i) Facts. A participant is
receiving a benefit of $1,500 per month. The
participant has 30 years of credited service
under the plan.
(ii) Calculation of accrual rate. The
participant’s accrual rate is $50, calculated
by dividing the participant’s monthly benefit
payment ($1,500) by the participant’s years of
credited service (30).
(iii) Calculation of monthly PBGCguaranteed benefit. The first $11 of the
accrual rate is fully guaranteed, and the next
$33 of the accrual rate is 75% guaranteed
($33 × .75 = $24.75). The participant’s
monthly guaranteed benefit per year of
credited service is $35.75 ($11 + $24.75 =
$35.75). The PBGC guarantee formula is then
applied to produce the amount of guarantee
payable by PBGC, which is $1,072.50 ($35.75
× 30 years = $1,072.50).
(iv) Calculation of guarantee-based
limitation. A suspension of benefits may not
reduce the participant’s benefits below the
guarantee-based limitation, which is equal to
110% of the amount of guarantee payable by
PBGC. That monthly amount is $1,179.75
($1,072.50 × 1.1 = $1,179.75).
Example 2. (i) Facts. The facts are the same
as in Example 1, except that the participant
is deceased and the participant’s beneficiary
is receiving a monthly benefit of $750 under
a 50% joint and survivor annuity.
(ii) Calculation of accrual rate. The
beneficiary’s accrual rate is $25, calculated
by dividing the beneficiary’s monthly benefit
payment ($750) by the participant’s years of
credited service (30).
(iii) Calculation of monthly PBGCguaranteed benefit. The first $11 of the
accrual rate is fully guaranteed, and the next
$14 ($25 ¥ $11 = $14) of the accrual rate is
75% guaranteed ($14 × .75 = $10.50). The
beneficiary’s monthly guaranteed benefit is
$21.50 per year of credited service ($11 +
$10.50 = $21.50). The PBGC guarantee

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formula is then applied to produce the
amount of guarantee payable by PBGC, which
is $645 ($21.50 × 30 years = $645).
(iv) Calculation of guarantee-based
limitation. A suspension of benefits may not
reduce the beneficiary’s benefits below the
guarantee-based limitation, which is equal to
110% of the monthly amount of guarantee
payable by PBGC. That monthly guaranteebased limitation amount is $709.50 ($645 ×
1.1 = $709.50).
Example 3. (i) Facts. A participant would
be eligible for a monthly benefit of $1,000
payable as a single life annuity at normal
retirement age, based on the participant’s 25
years of credited service. The plan also
permits a participant to receive a benefit on
an unreduced basis as a single life annuity
at early retirement age and permits
participants to receive an early retirement
benefit in the form of a Social Security level
income option. Under the Social Security
level income option, the participant receives
a monthly benefit of $1,600 prior to normal
retirement age (which is the plan’s assumed
Social Security retirement age) and $900 after
normal retirement age.
(ii) Calculation of accrual rate. For
purposes of calculating the accrual rate, the
monthly benefit that is used to calculate the
PBGC guarantee does not exceed the monthly
benefit of $1,000 that would be payable at
normal retirement age. In calculating the
accrual rate, the amount of guarantee payable
by PBGC would be based on a monthly
benefit of $1,000 prior to normal retirement
age and $900 after normal retirement age.
Before normal retirement age, the
participant’s accrual rate is $40, determined
by dividing the participant’s monthly benefit
payment ($1,000) by years of credited service
(25). After normal retirement age, the
participant’s accrual rate is $36, calculated
by dividing the participant’s monthly benefit
payment ($900) by the participant’s years of
credited service (25).
(iii) Calculation of monthly PBGCguaranteed benefit. Before normal retirement
age, the first $11 of the accrual rate is fully
guaranteed, and the next $29 of the accrual
rate is 75% guaranteed ($29 × .75 = $21.75).
The participant’s monthly guaranteed benefit
per year of credited service is $32.75 ($11 +
$21.75 = $32.75). The PBGC guarantee
formula is then applied to produce the
amount of guarantee payable by PBGC, which
is $818.75 ($32.75 × 25 years = $818.75).
After normal retirement age, the first $11 of
the accrual rate is fully guaranteed, and the
next $25 of the accrual rate is 75%
guaranteed ($25 × .75 = $18.75). The
participant’s monthly guaranteed benefit per
year of credited service is $29.75 ($11 +
$18.75 = $29.75). The PBGC guarantee
formula is then applied to produce the
amount of guarantee payable by PBGC, which
is $743.75 after normal retirement age
($29.75 × 25 years = $743.75).
(iv) Calculation of guarantee-based
limitation. A suspension of benefits may not
reduce the participant’s benefits below the
guarantee-based limitation, which is equal to
110% of the monthly amount of guarantee
payable by PBGC. That monthly guaranteebased limitation amount is $900.63 ($818.75
× 1.1 = $900.63) before normal retirement age

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and $818.13 ($743.75 × 1.1 = $818.13) after
normal retirement age.
Example 4. (i) Facts. A participant would
be eligible for a monthly benefit of $1,000
payable as a single life annuity at normal
retirement age, based on the participant’s 20
years of credited service. The plan provides
an actuarial increase for delaying benefits
until after normal retirement age. The
participant delays commencement of benefits
until after normal retirement age and the
participant’s monthly benefit is $1,200
instead of $1,000.
(ii) Calculation of accrual rate. For
purposes of calculating the accrual rate, the
monthly benefit that is used to calculate the
PBGC guarantee does not exceed the monthly
benefit of $1,000 that would be payable at
normal retirement age. Thus, in determining
the accrual rate, the PBGC guarantee would
be based on a monthly benefit of $1,000,
whether benefits are paid at or after normal
retirement age. The participant’s accrual rate
is $50, calculated by dividing the
participant’s monthly benefit payment
($1,000) by the participant’s years of credited
service (20).
(iii) Calculation of monthly PBGCguaranteed benefit. The first $11 of the
accrual rate is fully guaranteed, and the next
$33 of the accrual rate is 75% guaranteed
($33 × .75 = $24.75). The participant’s
monthly guaranteed benefit per year of
credited service is $35.75 ($11 + $24.75 =
$35.75). The PBGC guarantee formula is then
applied to produce the amount of guarantee
payable by PBGC, which is $715 ($35.75 × 20
years = $715).
(iv) Calculation of guarantee-based
limitation. A suspension of benefits may not
reduce the participant’s benefits below the
guarantee-based limitation, which is equal to
110% of the monthly amount of guarantee
payable by PBGC. That monthly guaranteebased limitation amount is $786.50 ($715 ×
1.1 = $786.50).
Example 5. (i) Facts. A plan provides that
a participant who has completed at least five
years of service will have a nonforfeitable
right to 100% of an accrued benefit (and will
not have a nonforfeitable right to any portion
of the accrued benefit prior to completing
five years of service). The plan implements
a suspension of benefits on January 1, 2017.
As of that date, a participant has three years
of vesting service, and none of the
participant’s benefits are nonforfeitable
under the terms of the plan.
(ii) Calculation of nonforfeitable benefits.
For purposes of applying the guarantee-based
limitation, the participant is considered to
have a nonforfeitable right to 100% of the
accrued benefit under the plan as of January
1, 2017.

(3) Age-based limitation—(i) No
suspension for participants or
beneficiaries who are age 80 and older.
No suspension of benefits is permitted
to apply to a participant, beneficiary, or
alternate payee who—
(A) Has commenced benefits as of the
effective date of the suspension; and
(B) Has attained 80 years of age no
later than the end of the month that

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includes the effective date of the
suspension.
(ii) Limited suspension for
participants and beneficiaries between
ages 75 and 80. No more than the
applicable percentage of the maximum
suspendable benefit may be suspended
for a participant, beneficiary, or
alternate payee who—
(A) Has commenced benefits as of the
effective date of the suspension; and
(B) Has attained 75 years of age no
later than the end of the month that
includes the effective date of the
suspension.
(iii) Maximum suspendable benefit—
(A) In general. For purposes of this
paragraph (d)(3), the maximum
suspendable benefit with respect to a
participant, beneficiary, or alternate
payee is the portion of the individual’s
benefits that would otherwise be
suspended pursuant to this section (that
is, the amount that would be suspended
without regard to the limitation in this
paragraph (d)(3)).
(B) Coordination of limitations. An
individual’s maximum suspendable
benefit is calculated after the
application of the guarantee-based
limitation under paragraph (d)(2) of this
section and the disability-based
limitation under paragraph (d)(4) of this
section.
(iv) Applicable percentage. For
purposes of this paragraph (d)(3), the
applicable percentage is the percentage
obtained by dividing—
(A) The number of months during the
period beginning with the month after
the month in which the suspension of
benefits is effective and ending with the
month during which the participant or
beneficiary attains the age of 80, by
(B) 60.
(v) Applicability of age-based
limitation to benefits paid to
beneficiaries. If the age-based limitation
in this paragraph (d)(3) applies to a
participant on the effective date of the
suspension, then the age-based
limitation also applies to the beneficiary
of the participant, based on the age of
the participant on the effective date of
the suspension.
(vi) Rule for benefits that have not
commenced at the time of the
suspension. If benefits have not
commenced to either a participant or
beneficiary as of the effective date of the
suspension, then in applying this
paragraph (d)(3)—
(A) If the participant is alive on the
effective date of the suspension, the
participant is treated as having
commenced benefits on that date; and
(B) If the participant is deceased on
effective date of the suspension, the

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beneficiary is treated as having
commenced benefits on that date.
(vii) Rules for alternate payees. The
age-based limitation in this paragraph
(d)(3) applies to a suspension of benefits
in which an alternate payee has an
interest, whether or not the alternate
payee has commenced benefits as of the
effective date of the suspension. For
purposes of this paragraph (d)(3), the
applicable percentage for an alternate
payee is calculated by—
(A) Using the participant’s age as of
the effective date of the suspension, if
the alternate payee’s right to the
suspended benefits derives from a
qualified domestic relations order
within the meaning of section
414(p)(1)(A) (QDRO) under which the
alternate payee shares in each benefit
payment but the participant retains the
right to choose the time and form of
payment with respect to the benefit to
which the suspension applies (shared
payment QDRO); or
(B) Substituting the alternate payee’s
age as of the effective date of the
suspension for the participant’s age, if
the alternate payee’s right to the
suspended benefits derives from a
QDRO under which the alternate payee
has a separate right to receive a portion
of the participant’s retirement benefit to
be paid at a time and in a form different
from that chosen by the participant
(separate interest QDRO).
(viii) Examples. The following
examples illustrate the rules of this
paragraph (d)(3):
Example 1. (i) Facts. The plan sponsor of
a plan in critical and declining status is
implementing a suspension of benefits,
effective December 1, 2017, that would
reduce all benefit payments under the plan
by 30%. On that date, a retiree is receiving
a monthly benefit of $1,500 (which is not a
benefit based on disability) and has 28 years
of credited service under the plan. If none of
the limitations in section 432(e)(9)(D)(i), (ii),
and (iii) were to apply, a 30% suspension
would reduce the retiree’s monthly benefit by
$450, to $1,050. Under the guarantee-based
limitation in section 432(e)(9)(D)(i), the
retiree’s monthly benefit could not be
reduced by more than $398.90, to $1,101.10
(1.1 × (28 × ($11 + (.75 × $33)))). The retiree
is 77 years old on the effective date of the
suspension, turns 78 on December 15, 2017,
and turns 80 on December 15, 2019.
(ii) Maximum suspendable benefit.
Because the retiree is not receiving a benefit
based on disability under section
432(e)(9)(D)(iii), the retiree’s maximum
suspendable benefit is $398.90 (which is
equal to the lesser of reduction that would
apply pursuant to the 30% suspension ($450)
or the amount of reduction that would be
permitted under the guarantee-based
limitation ($398.90)).
(iii) Applicable percentage. Because the
retiree is between ages 75 and 80 on the

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effective date of the suspension, the
reduction is not permitted to exceed the
applicable percentage of the retiree’s
maximum suspendable benefit. The number
of months during the period beginning with
January 2018 (the month after the month that
includes the effective date of the suspension)
and ending with December 2019 (the month
in which the retiree turns 80) is 24. The
applicable percentage is equal to 40% (24
months divided by 60).
(iv) Age-based limitation. The retiree’s
maximum suspendable benefit is $398.90
and the applicable percentage is 40%. Thus,
under the age-based limitation, the retiree’s
benefit may not be reduced by more than
$159.56 ($398.90 × .40 = $159.56). Because
the retiree was receiving a monthly benefit of
$1,500, the suspension of benefits may not
reduce the retiree’s monthly benefit below
$1,340.44 ($1,500 ¥ $159.56 = $1,340.44).
Example 2. (i) Facts. The facts are the same
as Example 1, except that the retiree is 79
years old on December 1, 2017, and turns 80
on December 15, 2017.
(ii) Age-based limitation. The suspension is
not permitted to apply to the retiree because
the retiree will turn 80 by the end of the
month (December 2017) in which the
suspension is effective.
Example 3. (i) Facts. The facts are the same
as Example 1, but on the effective date of the
suspension, the retiree is receiving a benefit
in the form of a 50% joint and survivor
annuity for himself and a contingent
beneficiary who is age 71. The retiree dies in
October 2018.
(ii) Application of age-based limitation to
contingent beneficiary. Because the retiree
had attained age 78 in the month that
included the effective date of the suspension,
the age-based limitation on the suspension of
benefits for a 78-year-old individual applies
to the retiree. The age-based limitation also
applies to the contingent beneficiary, even
though the contingent beneficiary had not
commenced benefits under the plan as of the
effective date of the suspension and had not
attained age 75 by the end of the month
containing the effective date of the
suspension.
(iii) Maximum suspendable benefit. The
contingent beneficiary’s amount of guarantee
payable by PBGC is based on the benefit the
beneficiary would have received from the
plan before the suspension ($750). The
beneficiary’s accrual rate is $26.7857
(calculated by dividing the monthly benefit
payment ($750) by years of credited service
(28)) and the beneficiary’s amount of
guarantee payable by PBGC is $639.50 (28 ×
($11 + (.75 × $15.7857))). The beneficiary’s
maximum suspendable benefit is $46.55
(which is equal to the lesser of reduction that
would apply pursuant to the 30% suspension
($225) or the amount of reduction that would
be permitted under the guarantee-based
limitation ($46.55, which is equal to ($750 ¥
1.1 × 639.50)).
(iv) Applicable percentage. The applicable
percentage for the beneficiary is based on the
retiree’s age of 78 on the effective date of the
suspension. Accordingly, the applicable
percentage for the beneficiary is 40%.
(v) Age-based limitation. The beneficiary’s
maximum suspendable benefit is $46.55 and

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the applicable percentage is 40%. Thus,
under the age-based limitation, the
beneficiary’s benefit may not be reduced by
more than $18.62 ($46.55 × .40 = $18.62).
Therefore, as a result of the retiree’s agebased limitation, the suspension of benefits
may not reduce the beneficiary’s monthly
benefit below $731.38 ($750 ¥ $18.62 =
$731.38).
Example 4. (i) Facts. The facts are the same
as Example 3, except that on the effective
date of the suspension the retiree is age 71
and the retiree’s contingent beneficiary is age
77.
(ii) Application of age-based limitation to
contingent beneficiary. Because the retiree
had not reached age 75 as of the effective
date of the suspension, the age-based
limitation on the suspension of benefits does
not apply to the retiree. The age-based
limitation also does not apply to the retiree’s
contingent beneficiary, even though the
contingent beneficiary had attained age 77 as
of the effective date of the suspension,
because the contingent beneficiary had not
yet commenced benefits on that date. The
beneficiary’s post-suspension benefit may not
be less than minimum benefit payable
pursuant to the guarantee-based limitation,
which is $703.45 ($639.50 × 1.1 = $703.45).
Example 5. (i) Facts. The facts are the same
as in Example 4, except that the retiree died
in October 2017, prior to the December 1,
2017 effective date of the suspension of
benefits. The retiree’s beneficiary
commenced benefits on November 1, 2017.
(ii) Application of age-based limitation to
contingent beneficiary. Because the retiree’s
beneficiary had commenced benefits before
the effective date of the suspension and had
reached age 75 by the end of the month that
includes the effective date of the suspension,
the age-based limitation applies to the
beneficiary based on the beneficiary’s age on
the effective date of the suspension.

(4) Disability-based limitation—(i)
General rule [The text of the proposed
amendments to § 1.432(e)(9)-1(d)(4)(i) is
the same as § 1.432(e)(9)–1T(d)(4)(i)
published elsewhere in this issue of the
Federal Register.]
(ii) Benefits based on disability—(A)
In general. For purposes of this section,
benefits based on disability means the
entire amount paid to a participant
pursuant to the participant becoming
disabled, without regard to whether a
portion of that amount would have been
paid if the participant had not become
disabled.
(B) Rule for auxiliary or other
temporary disability benefits. If a
participant begins receiving an auxiliary
or other temporary disability benefit and
the sole reason the participant ceases
receiving that benefit is commencement
of retirement benefits, the benefit based
on disability after commencement of
retirement benefits is the lesser of—
(1) The periodic payment the
participant was receiving immediately
before the participant’s retirement
benefits commenced; or

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(2) The total periodic payments to the
participant under the plan.
(C) Examples. The following
examples illustrate the disability-based
limitation on a suspension of benefits
under this paragraph (d)(4):
Example 1. (i) Facts. A participant with a
vested accrued benefit of $1,000 per month,
payable at age 65, becomes disabled at age
55. The plan applies a reduction to the
monthly benefit for early commencement if
the participant commences benefits before
age 65. For a participant who commences
receiving benefits at age 55, the actuarially
adjusted early retirement benefit is 60% of
the accrued benefit. However, the plan also
provides that if a participant becomes
entitled to an early retirement benefit on
account of disability, as defined in the plan,
the benefit is not reduced. On account of a
disability, the participant commences an
unreduced early retirement benefit of $1,000
per month at age 55 (instead of the $600
monthly benefit the participant would
receive if the participant were not disabled).
The participant continues to receive $1,000
per month after reaching age 65.
(ii) Conclusion. The participant’s disability
benefit payment of $1,000 per month
commencing at age 55 is a benefit based on
disability, even though the participant would
have received a portion of these benefits at
retirement regardless of the disability. Thus,
both before and after attaining age 65, the
participant’s entire monthly payment amount
($1,000) is a benefit based on disability. A
suspension of benefits is not permitted to
apply to any portion of the participant’s
benefit at any time.
Example 2. (i) Facts. The facts are the same
as Example 1, except that the terms of the
plan provide that when a disabled
participant reaches age 65, the disability
pension is discontinued by reason of
reaching age 65, and the retirement benefits
commence. In this case, the amount of the
participant’s retirement benefits is the same
as the amount that the participant was
receiving immediately before commencing
retirement benefits, or $1,000.
(ii) Conclusion. Before age 65, the
participant’s disability benefit payment of
$1,000 per month commencing at age 55 is
a benefit based on disability. After age 65, the
periodic payment of $1,000 per month that
the participant was receiving immediately
before commencing retirement benefits is a
benefit based on disability. Thus, both before
and after attaining age 65, the participant’s
entire monthly payment amount ($1,000) is
a benefit based on disability. A suspension of
benefits is not permitted to apply to any
portion of the participant’s benefit at any
time.
Example 3. (i) Facts. The facts are the same
as Example 2, except that upon reaching age
65, the participant elects to commence
payment of retirement benefits not in the
form of a single life annuity payable in the
amount of $1,000 per month but instead in
the form of an actuarially equivalent joint
and survivor annuity payable in the amount
of $850 per month.
(ii) Conclusion. Before age 65, the
participant’s benefit based on disability is

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$1,000 per month. After age 65, the
participant’s benefit based on disability is
$850 per month. Thus, a suspension of
benefits is not permitted to apply to any
portion of those benefits at any time.
Example 4. (i) Facts. A participant’s
disability pension is a specified amount
unrelated to the participant’s accrued benefit.
The participant’s disability benefit
commencing at age 55 is $750 per month.
Upon reaching age 65, the participant’s
disability pension is discontinued by reason
of reaching age 65 and the participant elects
to receive an accrued benefit payable in the
amount of $1,000 per month.
(ii) Conclusion. Before age 65, the
participant’s benefit based on disability is
$750 per month. After age 65, the
participant’s benefit based on disability
continues to be $750 per month (even though
the participant’s payment is $1,000 per
month), because the benefit based on
disability is the lesser of the periodic
disability pension the participant was
receiving immediately before retirement
benefits commenced ($750) and the periodic
payment to the participant under the plan
($1,000). Thus, a suspension of benefits is not
permitted to reduce the participant’s benefit
based on disability ($750 per month) at any
time.
Example 5. (i) Facts. The facts are the same
as Example 2, except that when the
participant attains age 65, the participant’s
monthly benefit payment increases from
$1,000 to $1,300 as a result of the plan
providing additional accruals during the
period of disability, as if the participant was
not disabled.
(ii) Conclusion. As in Example 2, before
age 65, the participant’s benefit payment of
$1,000 per month commencing at age 55 is
a benefit based on disability. After age 65, the
participant’s benefit payment of $1,300 per
month is a benefit based on disability
because the $1,300 is payable based on
additional accruals earned pursuant to the
participant becoming disabled. Thus, both
before and after attaining age 65, the
participant’s entire monthly payment amount
is a benefit based on disability. A suspension
of benefits is not permitted to apply to any
portion of the participant’s benefit at any
time.
Example 6. (i) Facts. The facts are the same
as Example 3 of paragraph (d)(2)(v) of this
section, except that the Social Security level
income option is only available to a
participant who incurs a disability as defined
in the plan.
(ii) Conclusion. Before normal retirement
age, the participant’s benefit payment of
$1,600 per month is a benefit based on
disability. After normal retirement age, the
participant’s benefit based on disability is
$900, which is the lesser of the $1,600
periodic payment that the participant was
receiving immediately before the
participant’s normal retirement benefit
commenced and the participant’s $900
normal retirement benefit. Thus, a
suspension of benefits is not permitted to
apply to any portion of those benefits ($1,600
per month before and $900 per month after
normal retirement age) at any time.
Example 7. (i) Facts. A plan applies a
reduction to the monthly benefit for early

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commencement if a participant commences
benefits before age 65. The plan also provides
that if a participant becomes disabled, as
defined in the plan, the benefit that is paid
before normal retirement age is not reduced
for early retirement. Under the plan, when a
disabled participant reaches age 65, the
disability pension is discontinued by reason
of reaching age 65 and the retirement benefits
commence. A participant with a vested
accrued benefit of $1,000 per month, payable
at age 65, becomes disabled at age 55. On
account of the disability, the participant
commences benefits at age 55 in the amount
of $1,000 per month (instead of the $600
monthly benefit the participant could have
received at that age if the participant were
not disabled). The participant recovers from
the disability at age 60, and the participant’s
disability benefits cease. At age 60, the
participant immediately elects to begin an
early retirement benefit of $800.
(ii) Conclusion. The participant’s disability
benefit payment of $1,000 per month
commencing at age 55 is a benefit based on
disability, even though the participant would
have received a portion of these benefits at
retirement regardless of the disability.
Because the participant ceased receiving
disability benefits on account of the
participant no longer being disabled (and not
solely on account of commencing retirement
benefits), the participant’s early retirement
benefit of $800 per month that began after the
disability benefit ended is not a benefit based
on disability.

(5) Limitation on aggregate size of
suspension—(i) General rule. Any
suspension of benefits (considered, if
applicable, in combination with a
partition of the plan under section 4233
of ERISA (partition)) must be at a level
that is reasonably estimated to—
(A) Enable the plan to avoid
insolvency; and
(B) Not materially exceed the level
that is necessary to enable the plan to
avoid insolvency.
(ii) Suspension sufficient to avoid
insolvency—(A) General rule. A
suspension of benefits (considered, if
applicable, in combination with a
partition of the plan) will satisfy the
requirement that it is at a level that is
reasonably estimated to enable the plan
to avoid insolvency if—
(1) For each plan year throughout an
extended period (as described in
paragraph (d)(5)(ii)(C) of this section)
beginning on the first day of the plan
year that includes the effective date of
the suspension, the plan’s solvency ratio
is projected on a deterministic basis to
be at least 1.0;
(2) Based on stochastic projections
reflecting variance in investment return,
the probability that the plan will avoid
insolvency throughout the extended
period is more than 50 percent; and
(3) Unless the plan’s projected funded
percentage (within the meaning of
section 432(j)(2)) at the end of the

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extended period using a deterministic
projection exceeds 100 percent, then the
projection shows that at all times during
the last five plan years of that period,
there is no projected decrease in either
the plan’s solvency ratio or its available
resources (as defined in section
418E(b)(3)).
(B) Solvency ratio. For purposes of
this section, a plan’s solvency ratio for
a plan year means the ratio of—
(1) The plan’s available resources (as
defined in section 418E(b)(3)) for the
plan year; to
(2) The scheduled benefit payments
under the plan for the plan year.
(C) Extended period. For purposes of
this section, an extended period means
a period of at least 30 plan years.
However, in the case of a temporary
suspension of benefits that is scheduled
to cease as of a date that is more than
25 years after the effective date, the
extended period must be lengthened so
that it ends no earlier than five plan
years after the cessation of the
suspension.
(iii) Suspension not materially in
excess of level necessary to avoid
insolvency—(A) General rule. A
suspension of benefits will satisfy the
requirement under paragraph (d)(5)(i)(B)
of this section that the suspension be at
a level that is reasonably estimated to
not materially exceed the level
necessary for the plan to avoid
insolvency only if an alternative, similar
but smaller suspension of benefits,
under which the dollar amount of the
suspension for each participant and
beneficiary is reduced by five percent
would not be sufficient to enable the
plan to satisfy the requirement to avoid
insolvency under paragraph (d)(5)(i)(A)
of this section.
(B) Special rule for partitions. If the
PBGC issues an order partitioning the
plan, then a suspension of benefits with
respect to the plan will be deemed to
satisfy the requirement under paragraph
(d)(5)(i)(B) of this section that the
suspension be at a level that is
reasonably estimated to not materially
exceed the level necessary for the plan
to avoid insolvency.
(iv) Actuarial basis for projections—
(A) In general. This paragraph (d)(5)(iv)
sets forth rules for the actuarial
projections that are required under this
paragraph (d)(5). The projections must
reflect the assumption that the
suspension of benefits continues
indefinitely (or, if the suspension
expires on a specified date by its own
terms, until that date).
(B) Reasonable actuarial assumptions
and methods. The actuarial assumptions
and methods used for the actuarial
projections must be reasonable, in

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accordance with the rules of section
431(c)(3). The actuary’s selection of
assumptions about future covered
employment and contribution levels
(including contribution base units and
average contribution rate) may be based
on information provided by the plan
sponsor, which must act in good faith in
providing the information. In addition,
to the extent that the actuarial
assumptions used for the deterministic
projection differ from those used to
certify whether the plan is in critical
and declining status pursuant to section
432(b)(3)(B)(iv), a justification for that
difference must be provided. Similarly,
to the extent that the actuarial
assumptions used for the stochastic
projection differ from those used for the
deterministic projection (other than the
rate of investment return), a justification
for that difference must be provided.
(C) Initial value of plan assets and
cash flow projections. Except as
provided in paragraph (d)(5)(iv)(D) of
this section, the cash flow projections
must be based on—
(1) The fair market value of assets as
of end of the most recent calendar
quarter;
(2) Projected benefit payments that are
consistent with the projected benefit
payments under the most recent
actuarial valuation; and
(3) Appropriate adjustments to
projected benefit payments to include
benefits for new hires who are reflected
in the projected contribution amounts.
(D) Requirement to reflect significant
events. The projected cash flows relating
to contributions, withdrawal liability
payments, and benefit payments must
also be adjusted to reflect significant
events that occurred after the most
recent actuarial valuation. Significant
events include—
(1) A plan merger or transfer;
(2) The withdrawal or the addition of
employers that changed projected cash
flows relating to contributions,
withdrawal liability payments, or
benefit payments by more than five
percent;
(3) A plan amendment, a change in a
collective bargaining agreement, or a
change in a rehabilitation plan that
changed projected cash flows relating to
contributions, withdrawal liability
payments, or benefit payments by more
than five percent; or
(4) Any other event or trend that
resulted in a material change in the
projected cash flows.
(v) Simplified determination for
smaller plans. In the case of a plan that
is not large enough to be required to
select a retiree representative under
paragraph (b)(4) of this section, the
determination of whether the benefit

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suspension (or a benefit suspension in
combination with a partition of the
plan) will satisfy the requirement that it
is at a level that is reasonably estimated
to enable the plan to avoid insolvency
is permitted to be made without regard
to paragraph (d)(5)(ii)(A)(2) of this
section.
(vi) Additional disclosure—(A)
Disclosure of past experience for critical
assumptions. The application for
suspension must include a disclosure of
the total contributions, total
contribution base units and average
contribution rate, withdrawal liability
payments, and the rate of return on plan
assets for each of the 10 plan years
preceding the plan year in which the
application is submitted.
(B) Sensitivity of results to investment
return assumptions. The application
must include deterministic projections
of the plan’s solvency ratio over the
extended period using two alternative
assumptions for the plan’s rate of return.
These alternatives are that the plan’s
future rate of return will be lower than
the assumed rate of return used under
paragraph (d)(5)(iv)(B) of this section
by—
(1) One percentage point; and
(2) Two percentage points.
(C) Sensitivity of results to industry
level assumptions. The application must
include deterministic projections of the
plan’s solvency ratio over the extended
period using two alternative
assumptions for the future contribution
base units. These alternatives are that
the future contribution base units—
(1) Continue under the same trend as
the plan experienced over the past 10
years; and
(2) Continue under the trend
identified in paragraph (d)(5)(vi)(C)(1) of
this section reduced by one percentage
point.
(D) Projection of funded percentage.
The application must include an
illustration, prepared on a deterministic
basis, of the projected value of plan
assets, the accrued liability of the plan
(calculated using the unit credit funding
method), and the funded percentage for
each year in the extended period.
(6) Equitable distribution—(i) In
general. Any suspension of benefits
must be equitably distributed across the
participant and beneficiary population,
taking into account factors, with respect
to participants and beneficiaries and
their benefits, that may include one or
more of the factors described in
paragraph (d)(6)(ii) of this section. If a
suspension of benefits applies
differently to different categories or
groups of participants and beneficiaries,
then the suspension of benefits is
equitably distributed across the

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participant and beneficiary population
only if under the suspension—
(A) Within each such category or
group, the individuals are treated
consistently;
(B) Any difference in treatment among
the different categories or groups is
based on relevant factors reasonably
selected by the plan sponsor, such as
the factors described in paragraph
(d)(6)(ii) of this section; and
(C) Any such difference in treatment
is based on a reasonable application of
the relevant factors.
(ii) Factors that may be considered—
(A) In general. In accordance with
paragraph (d)(6)(i)(B) of this section, if
there is any difference in the application
of the suspension of benefits between
one classification of participants and
beneficiaries and another classification
of participants and beneficiaries, that
difference must be based reasonably on
the statutory factors (described in
paragraph (d)(6)(ii)(B) of this section)
and any other factors reasonably
selected by the plan sponsor. For
example, it would be reasonable for a
plan sponsor to conclude that the
statutory factor described in paragraph
(d)(6)(ii)(B)(3) of this section (amount of
benefit) is a factor that should be taken
into account as justifying a lesser benefit
reduction for participants or
beneficiaries whose benefits are closer
to the level of the PBGC guarantee than
for others. In addition, it would be
reasonable for a plan sponsor to
conclude that the presumed financial
vulnerability of certain participants or
beneficiaries who are reasonably
deemed to be in greater need of
protection than other participants or
beneficiaries is a factor that should be
taken into account as justifying a lesser
benefit reduction (as a percentage or
otherwise) for those participants or
beneficiaries than for others.
(B) Statutory factors. Factors that may
be selected as a basis for differences in
the application of a suspension of
benefits include, when reasonable under
the circumstances, the following
statutory factors:
(1) The age and life expectancy of the
participant and/or beneficiary;
(2) The length of time that benefits
have been in pay status;
(3) The amount of benefits;
(4) The type of benefit, such as
survivor benefit, normal retirement
benefit, or early retirement benefit;
(5) The extent to which a participant
or beneficiary is receiving a subsidized
benefit;
(6) The extent to which a participant
or beneficiary has received postretirement benefit increases;

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(7) The history of benefit increases
and reductions for participants and
beneficiaries;
(8) The number of years to retirement
for active employees;
(9) Any differences between active
and retiree benefits;
(10) The extent to which active
participants are reasonably likely to
withdraw support for the plan,
accelerating employer withdrawals from
the plan and increasing the risk of
additional benefit reductions for
participants in and out of pay status;
and
(11) The extent to which a
participant’s or beneficiary’s benefits are
attributable to service with an employer
that failed to pay its full withdrawal
liability.
(iii) Reasonable application of factors.
A suspension of benefits will not satisfy
the requirement to be equitably
distributed if it is based on an
unreasonable application of the factors
referred to in paragraph (d)(6)(ii) of this
section. For example, it would
constitute an unreasonable application
of the factor described in paragraph
(d)(6)(ii)(B)(3) of this section (amount of
benefit) if that factor were used to justify
a larger suspension for participants with
smaller benefits.
(iv) Examples. The following
examples illustrate the rules on
equitable distribution of a suspension of
benefits in this paragraph (d)(6). As a
simplifying assumption for purposes of
these examples, it is assumed that the
facts of each example describe all of the
factors that are included in the
application discussed in the example
(provided, however, that, in the case of
a plan described in section 432(e)(9)(D)
(vii), the examples are not intended to
illustrate the application of section 432
(e)(9)(D)(vii) or its effect on the analysis
or conclusions in the examples).
Throughout these examples, the
guarantee-based, age-based, and
disability-based limitations of section
432(e)(9)(D)(i), (ii), and (iii) are referred
to as the individual limitations on
benefit suspensions.
Example 1. (i) Facts. A suspension of
benefits provides that, subject to the
individual limitations on benefit
suspensions, benefits for all participants and
beneficiaries are reduced by the same
percentage, and explains the rationale for this
reduction.
(ii) Conclusion. The suspension of benefits
is equitably distributed across the participant
and beneficiary populations.
Example 2. (i) Facts. A suspension of
benefits provides that, subject to the agebased and disability-based limitations of
section 432(e)(9)(D)(ii) and (iii), the portion
of each participant’s and beneficiary’s benefit
that exceeds the guarantee-based limitation

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of section 432(e)(9)(D)(i) is reduced by the
same percentage, and explains the rationale
for this reduction.
(ii) Conclusion. The suspension of benefits
is equitably distributed across the participant
and beneficiary populations. The result
would be the same if, instead, the suspension
of benefits applies only to benefits that
exceed a multiple (in excess of 100%) of the
guarantee-based limitation.
Example 3. (i) Facts. A plan was
previously amended to provide an ad hoc
15% increase to the benefits of all
participants and beneficiaries (including
participants who, at the time, were no longer
earning service under the plan, which
therefore included retirees and deferred
vested participants). The plan sponsor
applies for a suspension of benefits. Under
the suspension of benefits, subject to the
individual limitations on benefit
suspensions, benefits for all participants and
beneficiaries who were no longer earning
service under the plan at the time of the ad
hoc amendment are reduced by eliminating
the amendment for those individuals. The
suspension application explains why the
benefit reduction is based on the statutory
factors in paragraph (d)(6)(ii)(B)(6) of this
section (the extent to which a participant or
beneficiary has received post-retirement
benefit increases), including application of
the reduction to those who, at the time of the
previous benefit increase, were either retired
participants or deferred vested participants,
and in paragraph (d)(6)(ii)(B)(7) of this
section (the history of benefit increases and
reductions), and why it is reasonable to apply
the factors in this manner.
(ii) Conclusion. The suspension of benefits
is equitably distributed across the participant
and beneficiary populations. This is because
the difference in treatment among the
different groups of participants is based on
whether a participant has received postretirement benefit increases (in this case,
whether a participant was earning service
under the plan at the time of the benefit
increase amendment), which under these
facts is a relevant factor that may be
reasonably selected by the plan sponsor, and
the difference in treatment between the
groups of participants (eliminating the
amendment only for benefits with respect to
participants who were no longer earning
service at the time of the amendment) is
based on a reasonable application of that
factor.
Example 4. (i) Facts. A plan contains a
provision that provides a ‘‘thirteenth check’’
in plan years for which the investment return
is greater than 7% (which was the assumed
rate of return under the plan’s actuarial
valuation). The plan sponsor applies for a
suspension of benefits. Under the suspension
of benefits, subject to the individual
limitations on benefit suspensions, benefits
for all participants and beneficiaries are
reduced by eliminating the ‘‘thirteenth
check’’ for all those individuals. The
suspension application explains why the
benefit reduction is based on the statutory
factors in paragraph (d)(6)(ii)(B)(6) of this
section (the extent to which a participant or
beneficiary has received post-retirement
benefit increases) and in paragraph

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(d)(6)(ii)(B)(7) of this section (the history of
benefit increases and reductions), and why it
is reasonable to apply the factors in this
manner.
(ii) Conclusion. The suspension of benefits
is equitably distributed across the participant
and beneficiary populations.
Example 5. (i) Facts. A plan was
previously amended to reduce future
accruals from $60 per year of service to $50
per year of service. The plan sponsor applies
for a suspension of benefits. Under the
suspension of benefits, subject to the
individual limitations on benefit
suspensions, the accrued benefits for all
participants and beneficiaries are reduced to
$50 per year of service (and applies the
plan’s generally applicable adjustments for
early retirement and form of benefit). The
suspension application explains why the
benefit reduction is based on the statutory
factor in paragraph (d)(6)(ii)(B)(7) of this
section (the history of benefit increases and
reductions), and why it is reasonable to apply
the factors in this manner.
(ii) Conclusion. The suspension of benefits
is equitably distributed across the participant
and beneficiary populations. This is because
the difference in treatment among the
different groups of participants is based on
the history of benefit reductions and a
discrepancy between active and retiree
benefits, which under these facts are relevant
factors that may be reasonably selected by the
plan sponsor, and the difference in treatment
between the groups of participants (reducing
the $60 benefit multiplier to $50 per year of
service for those participants who had
accrued any benefits under the $60
multiplier) is based on a reasonable
application of those factors.
Example 6. (i) Facts. The facts are the
same as in Example 5, except that no plan
amendments have previously reduced future
accruals or other benefits for active
participants. Under the suspension of
benefits, subject to the individual limitations
on benefit suspensions, benefits for deferred
vested participants, retirees and beneficiaries
who have commenced benefits are reduced,
but no reduction applies to active
participants. The suspension of benefits is
not accompanied by any reductions in future
accruals or other benefits for active
participants.
(ii) Conclusion. The suspension of benefits
is not equitably distributed across the
participant and beneficiary populations. This
is because, under these facts, no relevant
factor (such as a previous reduction in
benefits applicable only to active
participants) has been reasonably selected by
the plan sponsor to justify the proposed
difference in treatment among the categories.
Example 7. (i) Facts. The facts are the
same as in Example 6, except that the
suspension of benefits provides for a
reduction that applies to both active and
inactive participants. However, the reduction
that applies to active participants is smaller
than the reduction that applies to inactive
participants because the plan sponsor
concludes, as explained and supported in the
application for suspension, that active
participants are reasonably likely to
withdraw support for the plan if any larger
reduction is applied.

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(ii) Conclusion. The suspension of benefits
is equitably distributed across the participant
and beneficiary populations. This is because
the difference in treatment among the
different groups of participants is based on
the extent to which active participants are
reasonably likely to withdraw support for the
plan, which under these facts is a relevant
factor that may reasonably be selected by the
plan sponsor, and the difference in treatment
between the two groups of participants
(applying a greater suspension to inactive
than to active participants) is based on a
reasonable application of that factor.
Example 8. (i) Facts. A suspension of
benefits provides that, subject to the
individual limitations on benefit
suspensions, the benefits for participants and
beneficiaries attributable to service with an
employer that failed to pay its full
withdrawal liability are reduced by 50%. The
plan sponsor applies for a suspension of
benefits. As explained in the suspension
application, the present value of the benefit
reduction with respect to the former
employees of one such employer is
significantly greater than the unpaid
withdrawal liability for that employer.
Benefits for participants and beneficiaries
attributable to service with all other
employers are reduced by 10%.
(ii) Conclusion. The suspension of benefits
is not equitably distributed across the
participant and beneficiary populations. This
is because although the difference in
treatment among the different groups of
participants is based on a relevant factor that
may reasonably be selected by the plan
sponsor, the difference in treatment between
the groups of participants is not based on a
reasonable application of that factor.
Example 9. (i) Facts. A suspension of
benefits provides that, subject to the
individual limitations on benefit
suspensions, the benefits for all participants
and beneficiaries are reduced by the same
percentage, except that the benefits for
employees and former employees of a
particular employer that is actively
represented on the plan’s Board of Trustees
are reduced by a specified lesser percentage.
(ii) Conclusion. The suspension of benefits
is not equitably distributed across the
participant and beneficiary populations. This
is because, under these facts, no relevant
factor has been reasonably selected by the
plan sponsor to justify the difference in
treatment among the groups of employees.
Example 10. (i) Facts. The facts are the
same as in Example 9, except that the
particular employer whose employees and
former employees are subject to the lesser
benefit reduction is the union that also
participates in the plan.
(ii) Conclusion. The suspension of benefits
is not equitably distributed across the
participant and beneficiary populations. This
is because, under these facts, no relevant
factor has been reasonably selected by the
plan sponsor to justify the difference in
treatment among the groups of employees.
Example 11. (i) Facts. A suspension of
benefits provides that, subject to the
individual limitations on benefit
suspensions, the monthly benefit of all
participants and beneficiaries is reduced to

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110% of the monthly benefit that is
guaranteed by the PBGC under section 4022A
of ERISA. The plan sponsor applies for a
suspension of benefits. As explained in the
suspension application, this is because the
plan sponsor is applying to the PBGC for a
partition of the plan, which requires the plan
sponsor to have implemented the maximum
benefit suspensions under section 432(e)(9).
(ii) Conclusion. The suspension of benefits
is equitably distributed across the participant
and beneficiary populations.
Example 12. (i) Facts. The facts are the
same as in Example 1, except that the
suspension of benefits provides that the
protection for benefits based on disability
also includes payments to a beneficiary of a
participant who had been receiving benefits
based on disability at the time of death.
(ii) Conclusion. The suspension of benefits
is equitably distributed across the participant
and beneficiary populations because this
suspension design is a reasonable application
of the statutory factor in paragraph
(d)(6)(ii)(B)(4) of this section (type of benefit).

(7) Effective date of suspension made
in combination with partition. [The text
of the proposed amendments to
§ 1.432(e)(9)-1(d)(7) is the same as
§ 1.432(e)(9)–1T(d)(7) published
elsewhere in this issue of the Federal
Register.]
(e) Benefit improvements—(1)
Limitations on benefit improvements.
This paragraph (e) sets forth rules for
the application of section 432(e)(9)(E). A
plan satisfies the criteria in section
432(e)(9)(E) only if, during the period
that any suspension of benefits remains
in effect, the plan sponsor does not
implement any benefit improvement
except as provided in this paragraph (e).
Paragraph (e)(2) of this section describes
limitations on a benefit improvement for
participants and beneficiaries who are
not yet in pay status. Paragraph (e)(3) of
this section describes limitations on a
benefit improvement for participants
and beneficiaries who are in pay status.
Paragraph (e)(4) of this section provides
that the limitations in this paragraph (e)
generally apply in addition to other
limitations on benefit increases that
apply to a plan. Paragraph (e)(5) of this
section defines benefit improvement.
(2) Limitations on benefit
improvements for those not in pay
status—(i) Equitable distribution for
those in pay status and solvency
projection. During the period that any
suspension of benefits under a plan
remains in effect, the plan sponsor may
not increase the liabilities of the plan by
reason of any benefit improvement for
any participant or beneficiary who was
not in pay status for any plan year
before the plan year for which the
benefit improvement takes effect,
unless—
(A) The present value of the total
liabilities for a benefit improvement for

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participants and beneficiaries whose
benefit commencement dates were
before the first day of the plan year for
which the benefit improvement takes
effect is not less than the present value
of the total liabilities for a benefit
improvement for participants and
beneficiaries who were not in pay status
by that date;
(B) The plan sponsor equitably
distributes the benefit improvement
among the participants and beneficiaries
whose benefit commencement dates
were before the first day of the plan year
in which the benefit improvement is
proposed to take effect; and
(C) The plan actuary certifies that
after taking into account the benefit
improvement, the plan is projected to
avoid insolvency indefinitely.
(ii) Rules of application—(A) Present
value determination. For purposes of
paragraph (e)(2)(i)(A) of this section, the
present value of the total liabilities for
a benefit improvement is the present
value as of the first day of the plan year
in which the benefit improvement is
proposed to take effect, using actuarial
assumptions in accordance with section
431.
(B) Factors relevant to equitable
distribution. The evaluation of whether
a benefit improvement is equitably
distributed for purposes of paragraph
(e)(2)(i)(B) of this section must take into
account the relevant factors described in
paragraph (d)(6)(ii)(B) of this section
and the extent to which the benefits of
the participants and beneficiaries were
suspended.
(C) Actuarial certification. The
certification in paragraph (e)(2)(i)(C) of
this section must be made using the
standards described in paragraphs
(d)(5)(ii), (iv), and (v) of this section,
substituting the plan year that includes
the effective date of the benefit
improvement for the plan year that
includes the effective date of the
suspension.
(iii) Special rule for certain benefit
increases. The limitations of this
paragraph (e) do not apply to a
resumption of suspended benefits or
plan amendment that increases
liabilities with respect to participants
and beneficiaries not in pay status by
the first day of the plan year in which
the benefit improvement took effect
that—
(A) The Secretary of the Treasury, in
consultation with the PBGC and the
Secretary of Labor, determines to be
reasonable and which provides for only
de minimis increases in the liabilities of
the plan; or
(B) Is required as a condition of
qualification under section 401 or to
comply with other applicable law, as

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determined by the Secretary of the
Treasury.
(3) Limitation on resumption of
suspended benefits only for those in pay
status. The plan sponsor may increase
liabilities of the plan by eliminating
some or all of the suspension that
applies solely to participants and
beneficiaries in pay status at the time of
the resumption, provided that the plan
sponsor equitably distributes the value
of those resumed benefits among
participants and beneficiaries in pay
status, taking into account the relevant
factors described in paragraph
(d)(6)(ii)(B) of this section. A
resumption of benefits that is described
in this paragraph (e)(3) is not subject to
the limitations on a benefit
improvement under section 432(f)
(relating to restrictions on benefit
increases for plans in critical status).
(4) Additional limitations. Except as
provided in paragraph (e)(3) of this
section, the limitations on a benefit
improvement under this paragraph (e)
are in addition to the limitations in
section 432(f) and any other applicable
limitations on increases in benefits
imposed on a plan.
(5) Definition of benefit
improvement—(i) In general. For
purposes of this paragraph (e), the term
benefit improvement means, with
respect to a plan, a resumption of
suspended benefits, an increase in
benefits, an increase in the rate at which
benefits accrue, or an increase in the
rate at which benefits become
nonforfeitable under the plan.
(ii) Effect of expiration of suspension.
In the case of a suspension of benefits
that expires as of a date that is specified
in the plan amendment implementing
the suspension, the resumption of
benefits solely from the expiration of
that period is not treated as a benefit
improvement.
(f) Notice requirements—(1) In
general. [The text of the proposed
amendments to § 1.432(e)(9)–1(f)(1) is
the same as § 1.432(e)(9)–1T(f)(1)
published elsewhere in this issue of the
Federal Register.]
(2) Content of notice. [The text of the
proposed amendments to § 1.432(e)(9)–
1(f)(2) is the same as § 1.432(e)(9)–
1T(f)(2) published elsewhere in this
issue of the Federal Register.]
(3) Form and manner—(i) Timing.
[The text of the proposed amendments
to § 1.432(e)(9)–1(f)(3)(i) is the same as
§ 1.432(e)(9)–1T(f)(3)(i) published
elsewhere in this issue of the Federal
Register.]
(ii) Method of delivery of notice—(A)
Written or electronic delivery. [The text
of the proposed amendments to
§ 1.432(e)(9)–1(f)(3)(ii)(A) is the same as

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§ 1.432(e)(9)–1T(f)(3)(ii)(A) published
elsewhere in this issue of the Federal
Register.]
(B) No alternative method of delivery.
A notice under this paragraph (f) must
be provided in written or electronic
form.
(iii) Additional information in notice.
[The text of the proposed amendments
to § 1.432(e)(9)–1(f)(3)(iii) is the same as
§ 1.432(e)(9)–1T(f)(3)(iii) published
elsewhere in this issue of the Federal
Register.]
(iv) No false or misleading
information. [The text of the proposed
amendments to § 1.432(e)(9)–1(f)(3)(iv)
is the same as § 1.432(e)(9)–1T(f)(3)(iv)
published elsewhere in this issue of the
Federal Register.]
(4) Other notice requirement. [The
text of the proposed amendments to
§ 1.432(e)(9)–1(f)(4) is the same as
§ 1.432(e)(9)–1T(f)(4) published
elsewhere in this issue of the Federal
Register.]
(5) Examples. [The text of the
proposed amendments to § 1.432(e)(9)–
1(f)(5) is the same as § 1.432(e)(9)–
1T(f)(5) published elsewhere in this
issue of the Federal Register.]
(g) Approval or denial of an
application for suspension of benefits—
(1) Application. [The text of the
proposed amendments to § 1.432(e)(9)–
1(g)(1) is the same as § 1.432(e)(9)–
1T(g)(1) published elsewhere in this
issue of the Federal Register.]
(2) Solicitation of comments. [The text
of the proposed amendments to
§ 1.432(e)(9)–1(g)(2) is the same as
§ 1.432(e)(9)–1T(g)(2) published
elsewhere in this issue of the Federal
Register.]
(3) Approval or denial—(i) Deemed
approval. [The text of the proposed
amendments to § 1.432(e)(9)–1(g)(3)(i) is
the same as § 1.432(e)(9)–1T(g)(3)(i)
published elsewhere in this issue of the
Federal Register.]
(ii) Notice of denial. [The text of the
proposed amendments to § 1.432(e)(9)–
1(g)(3)(ii) is the same as § 1.432(e)(9)–
1T(g)(3)(ii) published elsewhere in this
issue of the Federal Register.]
(iii) Special rules for systemically
important plans. [The text of the
proposed amendments to § 1.432(e)(9)–
1(g)(3)(iii) is the same as § 1.432(e)(9)–
1T(g)(3)(iii) published elsewhere in this
issue of the Federal Register.]
(iv) Agreement to stay 225-day period.
The Secretary of the Treasury and the
plan sponsor may mutually agree in
writing to stay the 225-day period
described in paragraph (g)(3)(i) of this
section.
(4) Consideration of certain factors. In
evaluating whether the plan sponsor has
satisfied the requirement of paragraph

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(c)(3)(i)(A) of this section, the Secretary
of the Treasury, in consultation with the
PBGC and the Secretary of Labor, will
review the plan sponsor’s consideration
of each of the factors under paragraph
(c)(3)(ii) of this section (and any other
factor that the plan sponsor considered).
(5) Standard for accepting plan
sponsor determinations. In evaluating
the plan sponsor’s application, the
Secretary of the Treasury will accept the
plan sponsor’s determinations in
paragraph (c)(3) of this section unless
the Secretary concludes, in consultation
with the PBGC and the Secretary of
Labor, that the determinations were
clearly erroneous.
(6) Plan-sponsor certifications with
respect to plan amendments. The plan
sponsor’s application described in
paragraph (g)(1) of this section will not
be approved unless the plan sponsor
certifies that if the plan sponsor receives
final authorization to suspend as
described in paragraph (h)(6) of this
section with respect to the proposed
benefit suspension (or, in the case of a
systemically important plan, a proposed
or modified benefit suspension), the
plan sponsor chooses to implement the
suspension, and the plan sponsor
adopts the amendment described in
paragraph (a)(1) of this section, then it
will timely amend the plan to provide
that—
(i) If the plan sponsor fails to make
the annual determinations under section
432(e)(9)(C)(ii), then the suspension of
benefits will cease as of the first day of
the first plan year following the plan
year in which the plan sponsor fails to
make the annual-plan-sponsor
determinations in paragraph (c)(4) of
this section; and
(ii) Any future benefit improvement
must satisfy the requirements of section
432(e)(9)(E).
(7) Special Master. [The text of the
proposed amendments to § 1.432(e)(9)–
1(g)(7) is the same as § 1.432(e)(9)–
1T(g)(7) published elsewhere in this
issue of the Federal Register.]
(h) Participant vote on proposed
benefit reduction—(1) Requirement for
vote—(i) In general. [The text of the
proposed amendments to § 1.432(e)(9)–
1(h)(1)(i) is the same as § 1.432(e)(9)–
1T(h)(1)(i) published elsewhere in this
issue of the Federal Register.]
(ii) Communication by plan sponsor.
The plan sponsor must take reasonable
steps to inform eligible voters about the
proposed suspension and the vote. This
includes all eligible voters who may be
contacted by reasonable efforts in
accordance with paragraph (f)(1) of this
section. Anyone whom the plan sponsor
has been able to locate through these
means (or who has otherwise been

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located by the plan sponsor) must be
sent a ballot described in paragraph
(h)(3) of this section.
(2) Administration of vote. [Reserved]
(3) Ballots—(i) In general. The plan
sponsor must provide a ballot for the
vote that includes the following—
(A) A description of the proposed
suspension and its effect, including the
effect of the suspension on each
category or group of individuals affected
by the suspension and the extent to
which they are affected;
(B) A description of the factors
considered by the plan sponsor in
designing the benefit suspension,
including but not limited to the factors
in paragraph (d)(6)(ii) of this section;
(C) A description of whether the
suspension will remain in effect
indefinitely or will expire by its own
terms (and, if it will expire by its own
terms, when that will occur);
(D) A statement from the plan sponsor
in support of the proposed suspension;
(E) A statement in opposition to the
proposed suspension compiled from
comments received pursuant to the
solicitation of comments pursuant to
paragraph (g)(2) of this section;
(F) A statement that the proposed
suspension has been approved by the
Secretary of the Treasury, in
consultation with the PBGC and the
Secretary of Labor;
(G) A statement that the plan sponsor
has determined that the plan will
become insolvent unless the proposed
suspension takes effect (including the
year in which insolvency is projected to
occur without a suspension of benefits),
and an accompanying statement that
this determination is subject to
uncertainty;
(H) A statement that insolvency of the
plan could result in benefits lower than
benefits paid under the proposed
suspension and a description of the
projected benefit payments in the event
of plan insolvency;
(I) A statement that insolvency of the
PBGC would result in benefits lower
than benefits otherwise paid in the case
of plan insolvency;
(J) A statement that the plan’s actuary
has certified that the plan is projected
to avoid insolvency, taking into account
the proposed suspension of benefits
(and, if applicable, a proposed partition
plan), and an accompanying statement
that the actuary’s projection is subject to
uncertainty;
(K) A statement that the suspension
will go into effect unless a majority of
all eligible voters vote to reject the
suspension and that, therefore, a failure
to vote has the same effect on the
outcome of the vote as a vote in favor
of the suspension;

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(L) A copy of the individualized
estimate that was provided as part of the
earlier notice described in section
432(e)(9)(F) (or, if that individualized
estimate is no longer accurate, a
corrected version of that estimate); and
(M) A description of the voting
procedures, including the deadline for
voting.
(ii) Additional rules. [The text of the
proposed amendments to § 1.432(e)(9)–
1(h)(3)(ii) is the same as § 1.432(e)(9)–
1T(h)(3)(ii) published elsewhere in this
issue of the Federal Register.]
(iii) Ballot must be approved. [The
text of the proposed amendments to
§ 1.432(e)(9)–1(h)(3)(iii) is the same as
§ 1.432(e)(9)–1T(h)(3)(iii) published
elsewhere in this issue of the Federal
Register.]
(4) Implementing suspension
following vote—(i) In general. [The text
of the proposed amendments to
§ 1.432(e)(9)–1(h)(4)(i) is the same as
§ 1.432(e)(9)–1T(h)(4)(i) published
elsewhere in this issue of the Federal
Register.]
(ii) Effect of not sending ballot. Any
eligible voters to whom ballots have not
been provided (because the individuals
could not be located) will be treated as
voting to reject the suspension at the
same rate (in other words, in the same
percentage) as those to whom ballots
have been provided.
(5) Systemically important plans. [The
text of the proposed amendments to
§ 1.432(e)(9)–1(h)(5) is the same as
§ 1.432(e)(9)–1T(h)(5) published
elsewhere in this issue of the Federal
Register.]
(6) Final authorization to suspend.
[The text of the proposed amendments
to § 1.432(e)(9)–1(h)(6) is the same as
§ 1.432(e)(9)–1T(h)(6) published
elsewhere in this issue of the Federal
Register.]
(i) [Reserved].
John Dalrymple,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2015–14948 Filed 6–17–15; 11:15 am]
BILLING CODE 4830–01–P

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