Td 9765

Vol. 81

Thursday,

No. 82

April 28, 2016

Part III

Department of the Treasury

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Internal Revenue Service
26 CFR Part 1
Suspension of Benefits Under the Multiemployer Pension Reform Act of
2014: Final Rule

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Federal Register / Vol. 81, No. 82 / Thursday, April 28, 2016 / Rules and Regulations

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9765]
RIN 1545–BM66, RIN 1545–BM86

Suspension of Benefits Under the
Multiemployer Pension Reform Act of
2014
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations and removal of
temporary regulations.
AGENCY:

The Multiemployer Pension
Reform Act of 2014 (‘‘MPRA’’), which
was enacted by Congress as part of the
Consolidated and Further Continuing
Appropriations Act of 2015, relates to
multiemployer defined benefit pension
plans that are projected to have
insufficient funds, within a specified
timeframe, to pay the full plan benefits
to which individuals will be entitled
(referred to as plans in ‘‘critical and
declining status’’). Under MPRA, the
sponsor of a plan in critical and
declining status is permitted to reduce
the pension benefits payable to plan
participants and beneficiaries if certain
conditions and limitations are satisfied
(referred to in MPRA as a ‘‘suspension
of benefits’’). MPRA requires the
Secretary of the Treasury (Treasury
Department), in consultation with the
Pension Benefit Guaranty Corporation
(PBGC) and the Secretary of Labor
(Labor Department), to approve or deny
applications by sponsors of these plans
to reduce benefits. These regulations
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: Effective date: These regulations
are effective on April 28, 2016.
Applicability date: These regulations
apply to suspensions for which the
approval or denial is issued on or after
April 26, 2016. In the case of a
systemically important plan, the final
regulations apply with respect to any
modified suspension implemented on or
after April 26, 2016.
FOR FURTHER INFORMATION CONTACT: The
Department of the Treasury MPRA
guidance information line at (202) 622–
1559 (not a toll-free number).
SUPPLEMENTARY INFORMATION:

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SUMMARY:

Paperwork Reduction Act
The collection of information
contained in these regulations has been

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reviewed and approved by the Office of
Management and Budget under control
number 1545–2260.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless the collection of information
displays a valid control number.
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
This document contains amendments
to the Income Tax Regulations (26 CFR
part 1) under section 432(e)(9) of the
Internal Revenue Code (Code), as
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).
I. Statutory Provisions
Section 412 of the Code contains
minimum funding rules that generally
apply to pension plans. Section 431 sets
forth the funding rules that apply
specifically to multiemployer defined
benefit plans. Section 432 sets forth
additional rules that apply to certain
multiemployer plans in endangered or
critical status and permits plans in
critical status to be amended to reduce
certain otherwise protected benefits
(referred to as ‘‘adjustable benefits’’).
Section 305 of the Employee Retirement
Income Security Act of 1974, Public
Law 93–406 (88 Stat. 829 (1974)), as
amended (ERISA), sets forth rules that
are parallel to those set forth in section
432 of the Code.
Section 201 of MPRA amended
section 432 to add a new status, called
critical and declining status, for
multiemployer defined benefit plans.
Section 432(b)(6) provides that a plan is
treated as being in critical and declining
status if the plan satisfies any of the
specified criteria for the plan to be in
critical status and, in addition, is
projected to become insolvent within
the meaning of section 418E during the
current plan year or any of the 14
succeeding plan years (or 19 succeeding
plan years if the plan has a ratio of
inactive participants to active
participants that exceeds two to one or
if the funded percentage of the plan is
less than 80 percent).
Section 201 of MPRA also amended
section 432(e)(9) to prescribe benefit
suspension rules for plans in critical

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and declining status.1 Section
432(e)(9)(A) provides that,
notwithstanding section 411(d)(6) and
subject to section 432(e)(9)(B) through
(I), the plan sponsor of a plan in critical
and declining status may, by plan
amendment, suspend benefits that the
sponsor deems appropriate. Section
411(d)(6) provides generally that a plan
does not satisfy section 411 if an
amendment to the plan decreases a
participant’s accrued benefit. For this
purpose, a plan amendment that has the
effect of eliminating or reducing an
early retirement benefit or a retirementtype subsidy or eliminating an optional
form of benefit with respect to benefits
attributable to service before the
amendment is treated as reducing
accrued benefits.
A suspension of benefits is defined in
section 432(e)(9)(B)(i) as the temporary
or permanent reduction of any current
or future payment obligation of the plan
to any participant or beneficiary under
the plan, whether or not the participant
or beneficiary is in pay status at the time
of the suspension of benefits. Under
section 432(e)(9)(B)(ii), any suspension
will remain in effect until the earlier of
when the plan sponsor provides benefit
improvements in accordance with
section 432(e)(9)(E) or when the
suspension expires by its own terms.
Thus, if a suspension does not expire by
its own terms, it continues indefinitely.
Under the statute, a plan will not be
liable for any benefit payments not
made as a result of a suspension of
benefits. All references to suspensions
of benefits, increases in benefits, or
resumptions of suspended benefits with
respect to participants also apply with
respect to benefits of beneficiaries or
alternative payees of participants. See
section 432(e)(9)(B)(iv).
A. Retiree Representative
In the case of a plan with 10,000 or
more participants, section
432(e)(9)(B)(v) requires the plan sponsor
to select a plan participant in pay status
to act as a retiree representative. The
retiree representative is required to
advocate for the interests of the retired
and deferred vested participants and
beneficiaries of the plan throughout the
suspension approval process. The plan
must provide for the retiree
representative’s reasonable expenses,
1 Section 201 of MPRA makes parallel
amendments to section 305 of ERISA. The
Department of the Treasury has interpretive
jurisdiction over the subject matter of these
provisions under ERISA as well as the Code. See
also section 101 of Reorganization Plan No. 4 of
1978 (43 FR 47713). Thus, these regulations issued
under section 432 of the Code apply as well for
purposes of section 305 of ERISA.

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including reasonable legal and actuarial
support, commensurate with the plan’s
size and funded status.

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B. Conditions for Suspensions
Section 432(e)(9)(C) sets forth
conditions that must be satisfied before
a plan sponsor of a plan in critical and
declining status for a plan year may
suspend benefits. One condition is that
the plan actuary must certify, taking
into account the proposed suspension of
benefits (and, if applicable, a proposed
partition of the plan under section 4233
of ERISA (partition)), that the plan is
projected to avoid insolvency within the
meaning of section 418E, assuming the
suspension of benefits continues until it
expires by its own terms or, if no such
expiration date is set, indefinitely.
Another condition requires the 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 the determination that all
reasonable measures have been taken to
avoid insolvency, the plan sponsor may
choose to take into account various
factors that may include one or more of
ten factors identified in the statute. See
section 432(e)(9)(C)(ii).
C. 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 PBGC under section 4022A of 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
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
calculated 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

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ends with the month in which that
participant or beneficiary attains the age
of 80 by (ii) 60 months. Thus, the
suspension cannot apply to the benefit
of an individual who has attained age 80
as of the end of the month that includes
the effective date of the suspension.
Section 432(e)(9)(D) also requires the
aggregate benefit suspensions
(considered, if applicable, in connection
with a partition) to be reasonably
estimated to achieve, but not materially
exceed, the level that is needed to avoid
insolvency. If a suspension of benefits is
made in combination with a partition,
the statute provides that the suspension
may not occur before the effective date
of the partition. Under the statute, any
suspension of benefits must be equitably
distributed across the participant and
beneficiary population, taking into
account various factors chosen by the
plan sponsor that may include one or
more of 11 factors identified in the
statute. Section 432(e)(9)(D)(vii)
provides additional rules that apply to
certain plans.
D. 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 provides that a plan
sponsor may, in its sole discretion,
provide benefit improvements while a
suspension of benefits is in effect.
However, a plan 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) the benefit
improvement is accompanied by an
equitable distribution of benefit
improvements for those who have begun
to receive benefits (typically, retirees),
and (2) the plan actuary certifies that,
after taking the benefit improvement
into account, the plan is projected to
avoid insolvency indefinitely. 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 would take
effect.
E. Notice of Proposed Suspension
A plan sponsor may not suspend
benefits unless notice is provided in

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accordance with section 432(e)(9)(F).
Under this section, concurrently with an
application to suspend benefits under
section 432(e)(9)(G), the plan sponsor
must give notice to: (1) Plan participants
and beneficiaries who may be contacted
by reasonable efforts, (2) each employer
that has an obligation to contribute
(within the meaning of section 4212(a)
of ERISA) under the plan, and (3) each
employee organization that represents
plan participants employed by those
employers for purposes of collective
bargaining. The notice must contain
sufficient information to enable
individuals to understand the effect of
any suspension of benefits, including an
individualized estimate (on an annual
or monthly basis) of the effect on each
participant or beneficiary. The notice
must also contain certain other specified
information. The notice must be
provided in a form and manner
prescribed in guidance issued by the
Treasury Department in consultation
with PBGC and the Labor Department,
written in a manner so as to be
understood by the average plan
participant, and may be provided in
written, electronic, or other appropriate
form to the extent it is reasonably
accessible to those to whom notice must
be furnished.
Any notice provided under section
432(e)(9)(F)(i) will satisfy the
requirement for notice of a significant
reduction in benefits described in
section 4980F. See section
432(e)(9)(F)(iv).
F. Approval or Rejection of Proposed
Suspension
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
statute, the Treasury Department, in
consultation with PBGC and the Labor
Department, must approve an
application upon finding that the plan
is eligible for the suspension 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 listed
in 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.
Section 432(e)(9)(G) also requires an
application for a suspension of benefits

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to be published on the Web site of the
Department of the Treasury and requires
the Treasury Department to publish a
notice in the Federal Register within 30
days of receiving a suspension
application. The notice must solicit
comments from contributing employers,
employee organizations, and
participants and beneficiaries of the
plan for which a suspension application
was made, as well as other interested
parties.
Within 225 days after an application
for a suspension of benefits is
submitted, the statute requires the
Treasury Department, in consultation
with PBGC and the Labor Department,
to approve or deny the application. If
the plan sponsor is not notified within
that 225-day period that it has failed to
satisfy one or more applicable
requirements, then the application is
deemed to be approved. If the
application is rejected, then a notice to
the plan sponsor must detail the specific
reasons for the rejection, including
reference to the specific requirement not
satisfied. Approval or denial of an
application is treated as final agency
action for purposes of 5 U.S.C. 704 (that
is, the approval or denial is treated as
final agency action for purposes of the
Administrative Procedure Act, Public
Law 79–404 (60 Stat. 237 (1946), as
amended (APA)).
G. Participant Vote on Proposed Benefit
Reduction
If a suspension application is
approved, it cannot take effect before a
vote of plan participants and
beneficiaries on the suspension is
conducted. See section 432(e)(9)(H). The
vote will be administered by the
Treasury Department, in consultation
with PBGC and the Labor Department,
within 30 days after approval of the
suspension application. The plan
sponsor is required to provide a ballot
for the vote (subject to approval by the
Treasury Department, in consultation
with PBGC and the Labor Department).
The ballot must include certain
information specified in the statute. If a
majority of plan participants and
beneficiaries do not vote to reject the
suspension, then the statute requires the
Treasury Department, in consultation
with PBGC and the Labor Department,
to issue a final authorization to suspend
benefits within seven days after the
vote.
If a majority of plan participants and
beneficiaries vote to reject the
suspension, then the statute requires the
Treasury Department, in consultation
with PBGC and the Labor Department,
to determine whether the plan is a
systemically important plan no later

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than 14 days after the results of the vote
are certified. A systemically important
plan is a plan for which PBGC projects
the present value of projected financial
assistance payments to exceed $1.0
billion, as indexed, if suspensions are
not implemented.
If a majority of plan participants and
beneficiaries vote to reject the
suspension and the plan is not a
systemically important plan, a final
authorization to suspend benefits will
not be issued. In such a case, the statute
provides that the plan sponsor may
submit a new application for approval
of a suspension of benefits to the
Treasury Department.
If it is determined that the plan is
systemically important, then the
Participant and Plan Sponsor Advocate
selected under section 4004 of ERISA 2
has a 30-day period to submit
recommendations to the Treasury
Department with respect to the
suspension that was rejected by the vote
or recommendations for any
modifications to that suspension. Even
if that suspension was rejected by the
vote, the statute requires the Treasury
Department to permit the
implementation of either: (1) The
proposed benefit suspension, or (2) a
modification of that suspension made
by the Treasury Department in
consultation with PBGC and the Labor
Department. The Treasury Department
must complete this requirement within
90 days after certification of the results
of a vote rejecting a suspension for a
systemically important plan (and a
modification of the suspension by the
Treasury Department is permitted only
if the plan is projected to avoid
insolvency under the modification). In
such a case, the statute requires the
Treasury Department to issue the final
authorization to suspend in sufficient
time to allow the suspension or a
modified suspension to be implemented
by the end of the 90-day period
following certification of the results of
that vote.
Section 432(e)(9)(I)(i) allows a plan
sponsor to challenge a denial of an
application for suspension only after the
application is denied. Under the statute,
an action challenging the approval of a
suspension may be brought only
following the issuance of a final
authorization to suspend. The statute
also provides that a court will review an
action challenging approval of a
suspension of benefits in accordance
2 Pursuant to section 4004 of ERISA, the
Participant and Plan Sponsor Advocate acts as a
liaison between PBGC, sponsors of defined benefit
pension plans insured by PBGC, and participants in
plans trusteed by PBGC, and performs related
duties.

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with 5 U.S.C. 706 (which sets forth the
standard of review applicable for
purposes of the APA) and will not grant
a temporary injunction with respect to
a suspension unless it finds a clear and
convincing likelihood that the plaintiff
will prevail on the merits. Under section
432(e)(9)(I)(iii), participants and
beneficiaries affected by a suspension
‘‘shall not have a cause of action under
this title.’’ An action challenging either
the approval of a suspension of benefits
or the denial of an application for a
suspension of benefits may not be
brought more than one year after the
earliest date on which the plaintiff
acquired or should have acquired actual
knowledge of the existence of the cause
of action. See section 432(e)(9)(I)(iv).
II. Regulatory and Other Administrative
Guidance
On February 18, 2015, the Department
of the Treasury issued a Request for
Information on Suspensions of Benefits
under the Multiemployer Pension
Reform Act of 2014 in the Federal
Register (80 FR 8578) (request for
information). The request for
information included questions focusing
on certain matters to be addressed in
guidance implementing section
432(e)(9) and indicated that
multiemployer plans should not submit
applications for suspensions of benefits
prior to a date specified in such future
guidance.
On June 19, 2015, the Treasury
Department and the IRS published
temporary (TD 9723) and proposed
regulations (REG–102648–15) under
section 432(e)(9) in the Federal Register
at 80 FR 35207 and 80 FR 35262,
respectively (June 2015 regulations).
The June 2015 regulations provide
guidance regarding section 432(e)(9),
setting forth the requirements for a plan
sponsor to apply for a suspension of
benefits and for the Treasury
Department to process such an
application. The June 2015 regulations
reflect consideration of comments
received in response to the request for
information. The preamble to the June
2015 temporary regulations states that it
is expected that no application
proposing a benefit suspension will be
approved prior to the issuance of final
regulations, and that, if a plan sponsor
chooses to submit an application for
approval of a proposed benefit
suspension 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
differences in the final regulations.

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On June 19, 2015, the IRS also
released Rev. Proc. 2015–34, 2015–27
I.R.B. 4. The revenue procedure details
application procedures for a proposed
suspension of benefits and also contains
a model notice under section
432(e)(9)(F).
On September 2, 2015, the Treasury
Department and the IRS published
temporary (TD 9735) and proposed
regulations (REG–123640–15) on the
voting provisions under section
432(e)(9)(H) in the Federal Register at
80 FR 52972 and 80 FR 53068,
respectively (September 2015
regulations). The September 2015
regulations reflect consideration of
comments received pursuant to the
request for information.
On September 10, 2015, the Treasury
Department and the IRS conducted a
public hearing on the June 2015
regulations, at which speakers also
commented on the September 2015
regulations. A public hearing on the
September 2015 regulations was held on
December 18, 2015.
On February 11, 2016, the Treasury
Department and the IRS published
proposed regulations (REG–101701–16)
regarding the specific limitation on a
suspension of benefits under section
432(e)(9)(D)(vii) in the Federal Register
at 81 FR 7253 (February 2016
regulations). This specific limitation
governs the application of a suspension
of benefits under any plan that includes
benefits directly attributable to a
participant’s service with any employer
that has, prior to December 16, 2014,
withdrawn from the plan in a complete
withdrawal, paid its full withdrawal
liability, and, pursuant to a collective
bargaining agreement, assumed liability
for providing benefits to participants
and beneficiaries equal to any benefits
for such participants and beneficiaries
reduced as a result of the financial
status of the plan. A public hearing on
the February 2016 regulations was held
on March 22, 2016.
After consideration of the comments
received, the provisions of the June
2015 proposed regulations and the
September 2015 proposed regulations
(collectively, ‘‘2015 regulations’’) are
adopted by this Treasury decision,
subject to certain changes that are
summarized in this preamble. This
Treasury decision also removes the
temporary regulations under 432(e)(9)
that were published in June 2015 and
September 2015. This Treasury decision
does not contain final action on the
February 2016 regulations. On April 26,
2016 the IRS released Rev. Proc. 2016–
27, 2016–19 I.R.B.__, which updates the
application procedures and model
notice set forth in Rev. Proc. 2015–34.

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The Treasury Department consulted
with PBGC and the Labor Department in
developing these regulations and other
guidance.
Explanation of Provisions
I. Overview
These final regulations provide
guidance on requirements under section
432(e)(9) regarding a suspension of
benefits under a multiemployer defined
benefit plan that is in critical and
declining status. Except as otherwise
provided, these final regulations adopt
the provisions of the 2015 regulations.
II. General Rules on Suspension of
Benefits
These final regulations provide that,
subject to section 432(e)(9)(B) through
(I), the plan sponsor of a multiemployer
plan that is in critical and declining
status within the meaning of section
432(b)(6) for a plan year may, by plan
amendment, implement a suspension of
benefits that the plan sponsor deems
appropriate. Such a suspension is
permitted notwithstanding the generally
applicable anti-cutback provisions of
section 411(d)(6). The final regulations
clarify that, as amended, the terms of
the plan must satisfy the requirements
of section 401(a). For example, after the
effective date of a plan amendment
imposing a suspension of benefits, the
plan must satisfy the requirements of
section 411 with respect to the accrued
benefit as reduced, if applicable,
pursuant to that amendment. The plan
amendment implementing a suspension
of benefits must be adopted in a plan
year in which the plan is in critical and
declining status.
A. Contingent Suspensions
The 2015 regulations provide that
once a plan is amended to suspend
benefits, the 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 2015 regulations
state 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, pre-determined manner as of a
specified future effective date or dates.
The 2015 regulations indicate that a
plan’s terms are inconsistent with the
statutory requirements, however, if they
provide that the amount of a suspension
will change contingent upon the
occurrence of any other specified future

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25543

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, the 2015 regulations provide
that 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 if the
plan sponsor fails to make the annual
determination that the plan would not
be projected to avoid insolvency unless
benefits are suspended).
Some commenters objected to the
provisions of the 2015 regulations that
treat contingencies as inconsistent with
the requirements of section 432(e)(9)
and asked that certain types of
contingencies, such as contingencies
based on actuarial gain or loss, be
allowed. These commenters assert that
permitting these types of contingent
suspensions would be consistent with
the policy underlying the rule that the
aggregate suspension be reasonably
estimated to achieve, but not materially
exceed, the level necessary to avoid
plan insolvency.
Permitting benefits to be reduced or
increased on the occurrence of future
contingencies, however, would raise a
number of difficult challenges in
complying with statutory requirements:
The additional complexity of the
calculations relating to whether the
solvency requirements are satisfied and
whether the distribution of the
suspension is equitable; the inability of
the suspension notice to sufficiently
inform affected individuals of the actual
reduction to their benefits; and the
potential that the contingent suspension
could effectively result in benefit
increases that fail to comply with the
statutory requirements relating to
benefit increases. Therefore, the final
regulations retain the general rule that
contingent suspensions are inconsistent
with the requirements of section
432(e)(9).
However, individual-level
contingencies do not raise the same
concerns as other post-suspension
contingencies. Accordingly, the final
regulations clarify that a suspension can
take into account individual-level
contingencies (such as retirement,
death, or disability) for individuals who
have not commenced benefits before the
effective date of the suspension. For
example, a suspension of benefits can
reduce early retirement subsidies with
respect to participants who have not
commenced benefits before the effective
date of the suspension. Without this
clarification, this type of reduction
could be viewed as impermissible

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(because the level of the suspension
would be based on whether and when
an individual chooses to retire early).
Although the final regulations permit
certain individual-level contingencies,
the post-suspension terms of the plan
must satisfy all of the qualification
requirements of section 401(a). Thus, for
example, an individual-level, postsuspension contingency that reduces an
early retirement subsidy would be
permitted, provided that the suspension
does not result in an early retirement
benefit that is less valuable than the
post-suspension accrued benefit.
B. Definitions
As under the 2015 regulations, these
final regulations apply the section
432(j)(6) definition of a person in pay
status under a multiemployer plan.
Under that definition, a person is in pay
status if, at any time during the current
plan year, the person is a participant,
beneficiary, or alternate payee under the
plan and is paid an early, late, normal,
or disability retirement benefit under
the plan (or a death benefit under the
plan related to a retirement benefit).
These final regulations define the
term plan sponsor to mean the
association, committee, joint board of
trustees, or other similar group of
representatives of the parties that
establishes or maintains the
multiemployer plan. However, in the
case of a plan described in section
404(c), or a continuation of such a plan,
the term plan sponsor means the
association of employers that is the
employer settlor of the plan.
In the case of an individual who is
receiving benefits when the suspension
is implemented, the final regulations
provide that the effective date of
suspension is the first date as of which
any of the individual’s benefits are not
paid as a result of the suspension.
In the case of an individual who is not
receiving benefits as of the date a
suspension is implemented, the 2015
regulations define the effective date of
suspension as the first date as of which
the individual’s accrued benefit is
reduced as a result of the suspension. In
connection with the new provision in
the final regulations permitting
suspensions with individual-level
contingencies, the final regulations
provide a revised definition of effective
date of suspension that applies with
respect to an individual who is not
receiving benefits as of the date the
suspension is implemented and for
whom the suspension reduces benefits
that are not accrued benefits. For such
an individual, the effective date of
suspension is the first date as of which
the individual’s entitlement to benefits

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is reduced as a result of the
implementation of the suspension,
regardless of whether the individual is
eligible to commence benefits at that
date. This change to the definition of
effective date of suspension will affect
situations in which early retirement
factors are changed in a manner that
reduces the early retirement benefit
(independent of any reduction of the
accrued benefit) and the final
regulations include an example of a
suspension that provides for the
reduction of an early retirement benefit
effective January 1, 2019. In that case,
the effective date of the suspension is
January 1, 2019, even for a participant
who does not commence benefits until
a later year.
As under the June 2015 regulations,
the final regulations provide that, if a
suspension of benefits includes 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. This requires, for example,
that the age-based limitation be
separately applied as of the effective
date of each reduction under such a
phased-in suspension. However, if the
effective date of the final scheduled
reduction in benefits in a series of
reductions pursuant to a phased-in
suspension is less than three years after
the effective date of the first reduction
then, in the interest of avoiding undue
administrative complexity, 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 regulations as having
four separate effective dates.
The final regulations define the term
suspension of benefits to mean the
temporary or permanent reduction,
pursuant to the terms of the plan, of any
current or future payment obligation of
the plan with respect to any plan
participant. A suspension of benefits
can apply with respect to a plan

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participant regardless of whether the
participant, beneficiary, or alternate
payee has commenced receiving
benefits before the effective date of the
suspension of benefits. If a plan pays a
reduced level of benefits pursuant to a
suspension of benefits that complies
with the requirements of section
432(e)(9), then the plan is not liable for
any benefits not paid as a result of the
suspension.
A suspension of benefits may be of
indefinite duration or may expire as of
a certain date, and any expiration date
for a suspension of benefits must be
specified in the plan amendment
implementing the suspension. The final
regulations provide that a plan sponsor
may amend the plan to eliminate some
or all of a suspension of benefits,
provided that the amendment satisfies
the requirements that apply to benefit
improvements under section
432(e)(9)(E) (see section VI of this
preamble). The final regulations also
provide that, except as otherwise
specified, all references to suspensions
of benefits, increases in benefits, or
resumptions of suspended benefits with
respect to participants also apply with
respect to benefits of beneficiaries or
alternate payees (as defined in section
414(p)(8)) of participants.
III. Retiree Representative
The final regulations generally adopt,
with some clarifications, the provisions
of the 2015 regulations with respect to
the retiree representative. The retiree
representative, who must be a plan
participant in pay status, is selected by
the plan sponsor to advocate for the
interests of the retired and deferred
vested participants and beneficiaries of
the plan throughout the suspension
approval process.
The final regulations implement the
requirement that a retiree representative
must be selected for a plan with 10,000
or more participants. For purposes of
determining whether a plan has 10,000
or more participants, the final
regulations provide that the number of
participants is the number reported on
the most recently filed Form 5500,
‘‘Annual Return/Report of Employee
Benefit Plan.’’ 3 The final regulations
also provide that the plan sponsor must
select the retiree representative at least
60 days before the plan sponsor submits
an application to suspend benefits and
that the retiree representative must be a
plan participant who is in pay status
and may or may not be a plan trustee.
3 On the Form 5500 for the 2015 plan year, this
is the total number of participants as of the end of
the plan year that is reported on Part II, Line 6f.

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In order to increase retiree
representation in connection with
applications to suspend benefits, the
final regulations permit a plan sponsor
of a plan that has fewer than 10,000
participants to select a retiree
representative in connection with such
an application and plan sponsors are
encouraged to do so. If a retiree
representative is selected for such a
plan, the rules that apply to retiree
representatives for plans with 10,000 or
more participants (other than the rule
concerning the size of the plan and the
timing of the appointment) will apply.
The final regulations require that,
upon request, the plan sponsor must
promptly provide the retiree
representative with relevant information
(such as plan documents and data) that
is reasonably necessary to enable the
retiree representative to perform the
retiree representative’s role, which
includes, for example, the retiree
representative’s attendance at trustee
meetings at which the suspension
design is being developed. This
requirement applies both while the
suspension is being developed and
during the period while the suspension
application is pending with the
Treasury Department. The final
regulations provide for the retiree
representative to serve in this role
beginning before the plan sponsor
submits this application and to continue
in this role, at the discretion of the plan
sponsor, throughout the entire period of
the benefit suspension, rather than only
until the completion of the suspension
approval process. Such an extension
would enable the retiree representative
to monitor compliance with the ongoing
requirements relating to the suspension,
such as the requirement that the plan
sponsor make annual determinations
that all reasonable measures to avoid
insolvency have been taken and
continue to be taken but that a
suspension is necessary to avoid
insolvency, and that the plan sponsor
follow the rules relating to benefit
improvements.
The final regulations adopt the
provision from the 2015 regulations that
requires the plan to pay reasonable
expenses incurred by the retiree
representative, commensurate with the
plan’s size and funded status, with
slight modifications. The expenses that
must be paid by the plan include
reasonable expenses for legal and
actuarial support, which may be
obtained to influence the design of a
suspension, to analyze a proposed
suspension contained in an application,
or for other advocacy purposes.
Numerous commenters noted the
importance of communication between

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the retiree representative and retired
and deferred vested participants and
beneficiaries. In response, the final
regulations clarify that the plan must
pay other reasonable expenses incurred
by the retiree representative, such as
any reasonable expenses incurred in
communicating with the retired and
deferred vested participants and
beneficiaries of the plan about the
proposed suspension (because
communication with these individuals
is generally necessary to advocate for
their interests). The final regulations
include, as an example of a type of
expense that the plan must pay, any
reasonable expense incurred in
communicating with retired and
deferred vested participants and
beneficiaries of the plan. This
clarification was made to reflect that
communicating with these individuals
is a necessary component of advocating
for their interests.
The types of communication that are
necessary to enable the retiree
representative to advocate for the
interests of retired and deferred vested
participants and beneficiaries typically
include soliciting input directly from
these individuals that could be used to
influence the design of a suspension
before the plan sponsor applies for
approval of a suspension. After an
application for suspension has been
submitted for approval, necessary
communication would generally
include providing these individuals
with additional information regarding
the proposed suspension and the
suspension approval process so that
they can submit comments.
Communication also includes meeting
with groups of affected individuals
(either in person or telephonically), so
that the retiree representative can better
understand their concerns and the
potential effects of a proposed
suspension in order to advocate on
behalf of the retired and deferred vested
participants and beneficiaries when
preparing a comment or in
recommending that the plan sponsor
withdraw the application and submit a
revised suspension. To further this
communication, the plan sponsor
should inform the retiree representative
of, and invite the retiree representative
to, any meetings between the plan
sponsor and the retirees, deferred vested
participants and beneficiaries regarding
the proposed suspension.
If a retiree representative is unwilling
or unable to fulfill his or her obligations,
then the retiree representative can be
replaced so that the retirees, deferred
vested participants and beneficiaries
have representation throughout the
process.

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The final regulations refer to section
432(e)(9)(B)(v)(III) for rules relating to
the fiduciary status of a retiree
representative, but do not provide
additional guidance with respect to this
provision.
IV. Conditions for Suspensions
A plan sponsor of a plan in critical
and declining status may suspend
benefits only if the actuarial
certification requirement in section
432(e)(9)(C)(i) and the plan sponsor
determinations requirements in section
432(e)(9)(C)(ii) are satisfied. Under the
final regulations, a plan sponsor 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 non-exclusive list of factors
described in section 432(e)(9)(C)(ii).
A. Actuarial Certification
As under the 2015 regulations, the
final regulations provide that the
actuarial certification requirement in
section 432(e)(9)(C)(i) is satisfied if,
taking into account the proposed
suspension of benefits (and, if
applicable, a proposed partition of the
plan), the plan’s actuary certifies that
the plan is projected to avoid insolvency
within the meaning of section 418E,4
assuming the suspension of benefits
continues until it expires by its own
terms or, if no such expiration date is
set, indefinitely. The final regulations
prescribe rules for the comparable
requirement that the suspension (in
combination with a partition, if
applicable) be reasonably estimated to
avoid insolvency under section
432(e)(9)(D)(iv).
B. Plan Sponsor Determinations
1. Initial Plan Sponsor Determinations
The final regulations adopt, with
modifications described herein, the
provisions of the 2015 regulations that
a plan satisfies the initial plan sponsor
determinations requirement only if the
plan sponsor determines that: (1) All
reasonable measures to avoid
insolvency, within the meaning of
section 418E, have been taken, and (2)
the plan would not be projected to avoid
insolvency if no suspension of benefits
were applied under the plan.
The final regulations provide that a
plan sponsor, in making its
4 Under section 418E(b)(1), in general, a
multiemployer plan is insolvent for a plan year if
the plan’s available resources are not sufficient to
pay plan benefits when due for the plan year.

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determination that all reasonable
measures to avoid insolvency have been
taken, may take into account the nonexclusive list of factors set forth in
section 432(e)(9)(C)(ii). In addition,
when making the initial determination
that the plan would not be projected to
avoid insolvency if no suspension of
benefits were applied under the plan,
the final regulations provide that a plan
sponsor may rely on the actuarial
certification made pursuant to section
432(b)(3)(A)(i) that the plan is in critical
and declining status for the plan year.
2. Annual Plan Sponsor Determinations
Under the 2015 regulations, a plan
sponsor would satisfy the annual plan
sponsor determinations requirement for
a plan year only if the plan sponsor
determines, no later than the last day of
that plan year, that: (1) All reasonable
measures to avoid insolvency have been
and continue to be 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. One
commenter suggested that the language
in the 2015 regulations was not clear as
to what should occur in the event a
plan’s finances worsen significantly
after a suspension is implemented, so
that even if the maximum permissible
suspension were implemented the plan
would not be able to avoid insolvency.
The commenter presented one potential
interpretation, in which the worsened
financial situation would prohibit the
plan sponsor from making the required
annual determination, and, as a result,
the suspension could not remain in
effect. The commenter observed that it
would be illogical to interpret this
requirement to mean that a plan sponsor
could not meet the required certification
in such a case, resulting in an end to the
suspension. This was not the intent of
the 2015 regulations. Accordingly, the
final regulations clarify that the
standard for this determination (as well
as the initial plan sponsor
determination) is whether, absent a
suspension of benefits, the plan would
not be projected to avoid insolvency.
As under the 2015 regulations, the
final regulations require that the
projection of the plan’s avoidance of
insolvency must be made using the
standards that apply for purposes of
determining whether a suspension is
sufficient to avoid insolvency, as
described in section V.B.1 of this
preamble. The final regulations provide
that the plan sponsor must maintain a
written record of its annual
determinations in order to satisfy the
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requirement. This written record must
be included in an update to the
rehabilitation plan (described in
§ 432(e)(3)), 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 plan
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
written record.
The final regulations provide that 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 (and reflect those
measures in the written record
accordingly) in order to avoid the
expiration of the suspension as of the
first day of the next plan year.
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. Section 432(e)(9)(E) sets
forth the requirements for such a partial
restoration of suspended benefits and
for other benefit improvements. If
favorable actuarial experience would
allow the plan to avoid insolvency if the
benefit suspension were eliminated
entirely, the plan sponsor would be
unable to make the determination that a
suspension is necessary to avoid
insolvency. In such a case, the plan
sponsor’s inability to make the annual
plan sponsor determination would
require the plan sponsor to eliminate
the suspension as of the first day of the
next plan year.

A. Individual Limitations on
Suspensions

V. Limitations on Suspensions

1. Guarantee-Based Limitation
The final regulations provide that the
monthly benefit payable to a
participant, beneficiary, or alternate
payee may not be less than 110 percent
of the monthly benefit that would be
guaranteed by PBGC under section
4022A of ERISA if the plan were to
become insolvent as of the effective date
of the suspension (the guarantee-based
limitation). 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 relevant date
(in this case, the effective date of the
suspension). The dollar amount is 100
percent of the accrual rate up to $11 per
month, 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) divided 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 final regulations
include examples demonstrating how
the PBGC guarantee is calculated, which
reflect PBGC’s interpretation of section
4022A of ERISA.
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 final regulations treat benefits that
are forfeitable on the effective date of a
suspension as nonforfeitable, provided
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 of service
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.

The final regulations generally adopt
the individual and aggregate limitations
on a suspension of benefits under
section 432(e)(9)(D) as provided under
the 2015 regulations, with minor
clarifications. The regulations provide
that after applying the individual
limitations, the overall size and
distribution of the suspension is subject
to the aggregate limitations.

2. Disability-Based Limitation
The final regulations incorporate the
statutory requirement that benefits
based on disability as defined under the
plan may not be suspended. Like the
2015 regulations, the final regulations
provide that the term ‘‘benefits based on
disability’’ means the entire amount
paid by the plan to a participant
pursuant to the participant becoming

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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 a
benefit in that amount beginning at age
55 on account of a disability (as defined
in the plan) and elects to commence that
benefit. Under the plan, absent
disability, the participant would have
been entitled only 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 has elected to
commence a benefit on account of a
disability. The participant’s entire
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 final regulations 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 periodic payment
to the participant of retirement benefits
under the plan.
For example, assume that a
participant begins receiving a disability
benefit under the plan of $1,000 per
month payable at age 55. When the
participant attains age 65, the
participant’s disability benefit 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. Alternatively, if the
participant had elected to commence
payment of the participant’s accrued
benefit in the form of a single life
annuity, the amount payable would be
$1,000 per month. The benefit based on
disability is $1,000 per month before age
65 and, depending on the participant’s
election, either $850 per month or
$1,000 per month beginning at age 65.
A suspension of benefits is not
permitted to apply to any portion of
those benefits at any time.
A number of commenters suggested
that benefits based on disability should
also include retirement benefits elected
by participants who, despite qualifying
for benefits based on disability under
the plan, elected retirement benefits that

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were greater than the disability benefits
available under the plan. The final
regulations do not adopt this suggestion
because the disability-based limitation
applies only to benefits based on
disability (as defined under the plan).
Accordingly, because these individuals
did not elect disability benefits under
the plan, they are not considered to
have benefits based on disability for
purposes of the disability-based
limitation. Similarly, the beneficiary of
an individual who had benefits based
on disability is not considered to be
receiving benefits based on disability
under the plan for purposes of the
disability-based limitation. Nonetheless,
a plan sponsor is permitted to use a
broader definition of disability (or to
protect beneficiaries of disabled
individuals) when designing a
suspension of benefits, provided that
the suspension otherwise meets the
applicable requirements. The
regulations include examples of such
suspension designs, including a new
example that is discussed in section
V.B.4 of this preamble.
3. Age-Based Limitation
The final regulations generally adopt
the provisions of the 2015 regulations
with respect to the age-based limitations
with minor clarifications. The final
regulations provide that no suspension
of benefits is permitted to apply to a
participant or beneficiary who has
commenced receiving benefits as of the
effective date of the suspension and has
attained age 80 no later than the end of
the month that includes the effective
date of the suspension. For example, if
a suspension of benefits has an effective
date of December 1, 2017, then the
suspension cannot apply to the monthly
benefit of a retiree who is 79 on
December 1, 2017 and who attains age
80 on December 15, 2017. In addition,
the final regulations provide that no
more than the applicable percentage of
the maximum suspendable benefit may
be suspended for a participant or
beneficiary 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 final regulations provide that 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 this
preamble.
The applicable percentage is the
percentage obtained by dividing: (1) The
number of months during the period

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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 final 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 the effective
date. If the participant is deceased on
the effective date, the beneficiary is
treated as having commenced benefits
on the effective date.
The final regulations provide that 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. For purposes of this
rule, the age-based limitation applies to
the beneficiary based on the age of the
participant as of the end of the month
that includes the effective date of the
suspension.
The final regulations provide that 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
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 final
regulations provide that the applicable
percentage for the alternate payee is
calculated by using the participant’s age
as of the end of the month that includes
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 final
regulations provide that the applicable
percentage for the alternate payee is
calculated by substituting the alternate
payee’s age as of the end of the month
that includes the effective date of the
suspension for the participant’s age.
The provisions of the final regulations
regarding the age-based limitation are
generally the same as provisions of the
2015 regulations, except that the final

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regulations clarify that, with respect to
a benefit payable to a beneficiary or
alternate payee the relevant date for
determining the age of a participant,
beneficiary, or alternate payee, as
applicable, is the end of the month that
includes the effective date of the
suspension, rather than the effective
date of the suspension.
B. Aggregate Limitations

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1. Suspension Necessary To Avoid
Insolvency
The final regulations reflect the
statutory 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. With
respect to this requirement, the final
regulations are the same as the 2015
regulations, with a minor clarification.
The final regulations provide that a
suspension of benefits (considered, if
applicable, in combination with a
partition of the plan) satisfies 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 at
the end of the extended period using the
deterministic projection exceeds 100
percent, the projection shows that
during each of the last five plan years
of that period, neither the plan’s
solvency ratio nor its available resources
is projected to decrease.5 In the case of
a plan that is not large enough to be
required to select a retiree
representative (that is, a plan with fewer
than 10,000 participants), the stochastic
projection is not required.
For these purposes, a plan’s solvency
ratio for a plan year means the ratio of
the plan’s available resources 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.
5 The term ‘‘available resources’’ is defined in
section 418E(b)(3). Under that provision, a plan’s
available resources are generally equal to the
beginning-of-year assets adjusted for the expected
cash flow for the plan year (other than benefit
payments).

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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.
2. Suspension Not Materially in Excess
of Level Necessary To Avoid Insolvency
The final regulations provide rules for
applying the statutory requirement
under section 432(e)(9)(D)(iv) that any
suspension of benefits must be at a level
that does not materially exceed the level
necessary to enable the plan to avoid
insolvency. Under the 2015 regulations,
a proposed suspension of benefits
would satisfy this requirement only if
an alternative, similar but smaller,
suspension of benefits 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.
This alternative suspension would be
one under which the dollar amount of
the suspension for each participant and
beneficiary is reduced by five percent.
For example, if, under the original
proposed suspension, a participant’s
benefit were reduced by $1,400, from
$3,000 per month to $1,600 per month,
then the amount of the alternative
similar, but smaller suspension would
be $1,330 ($1,400 minus 5% of $1,400)
and the resulting monthly benefit would
be $1,670 ($3,000 minus $1,330). As
another example, if, under the original
proposed suspension, a participant’s
benefit were reduced by $500, from
$3,000 per month to $2,500 per month,
then the amount of the alternative
similar, but smaller suspension would
be $475 ($500 minus 5% of $500) and
the resulting monthly benefit would be
$2,525 ($3,000 minus $475).
The use of five percent for this
purpose is roughly comparable to the
common use in accounting standards of
a five-percent threshold for materiality
and strikes a balance between two
policy concerns raised by commenters.
One concern is that, if a suspension
ultimately proves larger than necessary
to avoid insolvency, then a smaller
suspension could have preserved the
solvency of the plan while imposing
less onerous benefit cuts. Another
concern is that, if a suspension proves
insufficient to allow the plan to avoid
insolvency, then a second suspension
may be needed. The margin by which a
suspension can exceed the amount
necessary to avoid insolvency while not
materially exceeding that amount
reflects a balancing of these two
concerns. Some commenters maintained

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that the five-percent margin in the 2015
regulations is too large and would have
the effect of permitting excessive
suspensions. Other commenters
maintained that the five-percent margin
is too narrow, especially in the case of
a smaller benefit suspension, because a
narrow margin increases the risk that
actuarial losses will cause a suspension
to prove insufficient for the plan to
avoid insolvency.
After consideration of these
comments, the Treasury Department
and the IRS believe that a five percent
margin generally strikes a reasonable
balance between the competing policy
concerns, but that a better balance
between these policy concerns is
achieved by increasing the margin in the
case of a suspension below a certain
size. Accordingly, the final regulations
modify this standard by adding a floor
to the five-percent margin of two
percent of the periodic payment
determined without regard to the
proposed reduction, a change which
will increase the margin in the case of
a somewhat smaller benefit suspension.
Thus, under the final regulations the
alternative, similar but smaller
suspension that is used for this purpose
is one in which the amount of the
proposed reduction in the periodic
payment (determined after application
of the individual limitations) is
decreased (but not below zero) by the
greater of five percent of the proposed
reduction or two percent of the periodic
payment determined without regard to
the proposed reduction. Applying this
standard to the earlier example under
which a participant’s benefit was
reduced by $500, from $3,000 per
month to $2,500 per month, then the
amount of the alternative, similar but
smaller suspension would be $440
($500 minus 2% of $3,000), rather than
$475 ($500 minus 5% of $500), and the
resulting monthly benefit would be
$2,560 ($3,000 minus $440), rather than
$2,525. Thus, the difference between the
monthly benefit under proposed
suspension and the monthly benefit
under the alternative, similar but
smaller suspension would be $60 (rather
than $25).
In addition, the final regulations
clarify that the extended period used to
demonstrate that the proposed
suspension does not materially exceed
the level that is reasonably estimated to
enable the plan to avoid insolvency
must be no shorter than the period used
for the demonstration that the proposed
suspension is reasonably estimated to
avoid insolvency.

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3. Actuarial Basis for Projections
The final regulations generally adopt
the provisions of the 2015 regulations
regarding the actuarial basis for
projections, with certain clarifications
in response to comments. The final
regulations 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).
Further, the final regulations provide
that 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 must act in
good faith in providing the information.
Finally, the final regulations provide
that, to the extent that an actuarial
assumption used for the projections
differs from that used to certify whether
the plan is in critical and declining
status pursuant to section
432(b)(3)(B)(iv), an explanation of the
information and analysis that led to the
selection of that different assumption
must be provided.
The final regulations clarify the
standards that apply to actuarial
assumptions to be used in actuarial
projections. The 2015 regulations
require that the actuarial assumptions
and methods used for the actuarial
projections be reasonable in accordance
with the rules of section 431(c)(3). The
final regulations replace that reference
with a specific requirement that each of
the actuarial assumptions and methods
used, and the combination of those
actuarial assumptions and methods,
must be reasonable, taking into account
the experience of the plan and
reasonable expectations. This standard
is similar to the standard under section
431(c)(3) requiring that each of the
actuarial assumptions and methods be
reasonable and that the combination of
those assumptions and methods offer
the actuary’s best estimate of anticipated
experience.
The final regulations also specify that,
to be reasonable, the actuarial
assumptions and methods must be
appropriate for the purpose of the
measurement.6 This means, among
other things, that factors specific to the
measurements must be taken into
6 Actuarial

Standards of Practice (ASOPs) are
issued by the Actuarial Standards Board and are
available at http://
www.actuarialstandardsboard.org/standards-ofpractice. Certain ASOPs, including ASOPs Nos. 4,
27, and 35, are relevant to the actuary’s selection
of assumptions.

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account in selecting the assumptions
and methods. These measurements (that
is, the cash flow projections) will be
used to demonstrate compliance with a
requirement that must be satisfied
before a plan in critical and declining
status is permitted to reduce participant
and beneficiary benefits, under
circumstances in which the reduction
will not automatically be adjusted if
actual experience differs from
projections. Moreover, such a plan’s
asset levels typically are projected to
decline during the earlier years of the
projections, even after reflecting the
proposed benefit suspension. For
example, actuarial assumptions for the
rate of investment return normally
would not be appropriate for the
purpose of projecting cash flows in
order to estimate whether a plan in
critical and declining status will avoid
insolvency if those assumptions were
developed in a manner that fails to take
into account the anticipated pattern and
magnitude of changes in the level of
plan assets during the projection period.
This is because the use of an investment
return assumption derived from a timeweighted average of the expected rates
of return for the entire projection period
would not result in an appropriate
projection of the expected dollar
amount of investment return over that
period to the extent anticipated rates of
return are expected to be smaller or
larger during the portion of that period
when the level of plan assets is expected
to be relatively higher. Thus, it would
not be appropriate to develop an
actuarial assumption for the rate of
investment return based solely on longterm expectations without taking these
differences into account.7
Like the 2015 regulations, the final
regulations require cash flow
projections to be based on the fair
market value of assets as of the end of
the calendar quarter immediately
preceding the date the application is
submitted, 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 that are reflected in the projected
contribution amounts. The final
regulations provide that the projected
cash flows relating to contributions,
withdrawal liability payments, and
7 Methods for developing an assumption for the
rate of return that would be appropriate for
purposes of the measurement include: (1) Using a
select and ultimate assumption that includes
different assumptions of investment returns for
different portions of the projection period, or (2)
developing a return assumption based on dollarweighted returns over the projection period.

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benefit payments must also be adjusted
to reflect significant events that
occurred after the most recent actuarial
valuation. For this purpose, 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
those projected cash flows.
A number of comments were received
regarding the actuarial projections
required as part of the application for
suspension. As described subsequently,
these projections include not only a
demonstration that the plan would
avoid insolvency but also a
demonstration of what would happen if
the plan were to have less favorable
experience, such as a lower investment
return.
Some commenters thought too much
information was required, resulting in
the expenditure of excessive time and
plan resources. Others thought too little
information was required and suggested
requiring additional information (such
as the extent to which contributions are
used to pay for past benefits rather than
for current accruals). The Treasury
Department and the IRS have reviewed
these comments and have concluded
that this information is valuable to the
Treasury Department for purposes of
evaluating whether a suspension is
reasonably estimated to enable the plan
to avoid insolvency. This information is
also informative for participants and
beneficiaries in deciding whether to
vote to accept or reject the suspension.8
The value of this information to the
Treasury Department and to participants
and beneficiaries outweighs the burden
of providing this information.
Accordingly, no changes have been
made to the regulations with respect to
the scope of the required actuarial
projections.
Under the final regulations, an
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
8 For example, a projection demonstrating that the
plan would not avoid insolvency if it were to
experience a lower rate of return helps participants
to understand that the actuarial projections in the
application are subject to uncertainty.

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assets for each of the 10 plan years
preceding the plan year in which the
application is submitted. In addition, an
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.
The final regulations also require that
an application 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. In addition, the final regulations
adopt the provisions from the 2015
regulations that provide that an
application must include deterministic
projections of the plan’s solvency ratio
over the extended period using two
alternative assumptions for future
contribution base units. These
alternatives are that 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. However, with respect
to calculating the sensitivity of actuarial
projections to the assumptions of future
contribution base units, the final
regulations clarify that it is permissible
for the projections to be made without
reflecting any adjustments to the
projected benefit payments that result
from those alternative assumptions
regarding future contribution base units.
4. Equitable Distribution of Suspension
The rules under the final regulations
regarding the equitable distribution
requirement are generally the same as
the rules under the 2015 regulations.
The final regulations require any
suspension of benefits to be equitably
distributed across the participant and
beneficiary population. If a suspension
of benefits provides for different
treatment for different participants and
beneficiaries, then the suspension of
benefits is equitably distributed across
the participant and beneficiary
population only if: (1) Under the
suspension, the participants and
beneficiaries are divided into separate
categories or groups that are defined by
the consistent treatment of individuals
within each separate category or group;
(2) any difference in the treatment under
the suspension 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 those relevant factors.

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With respect to a reasonable application
of the relevant factors, the final
regulations provide that it would be
unreasonable to apply a factor or factors
in a manner that is inconsistent with the
protections provided by the individual
limitations under section 432(e)(9)(D),
such as protections for older individuals
or individuals with benefits that are
closer to the PBGC guarantee level.
The final regulations contain new
rules to clarify when different groups of
participants and beneficiaries are
treated as separate categories or groups
for purposes of applying the equitable
distribution requirement in the case of
a proposed suspension of benefits under
which an individual’s benefits after
suspension are calculated under a new
benefit formula (rather than by reference
to an individual’s benefits before
suspension). In this case, the evaluation
of whether the proposed suspension is
equitably distributed across the
participant and beneficiary population
is based on a comparison of an
individual’s pre-suspension benefit to
the individual’s post-suspension benefit
(determined without regard to the
application of the individual
limitations). Accordingly, all
individuals whose pre-suspension
benefits are determined under a uniform
pre-suspension benefit formula and
whose post-suspension benefits are
determined under a different uniform
post-suspension benefit formula are
treated as a single group. The final
regulations clarify the application of
this rule in the case of different presuspension benefit formulas with
respect to different plan years. In
addition, the final regulations clarify
that two individuals are not treated as
having different pre-suspension or postsuspension benefit formulas merely
because, as a result of the application of
a uniform set of early retirement factors,
their benefits differ because of
retirement at different ages.
The final regulations include a
number of examples that illustrate the
equitable distribution rules, most of
which were included in the 2015
regulations. One new example
illustrates that plan sponsors may
consider factors other than the statutory
factors in determining whether a
distribution of the suspension is
equitable, provided that the factor is
consistent with the general conditions
and limitations required for a
suspension to satisfy section 432(e)(9).9
Under this example, a plan sponsor
9 Thus, a suspension is permitted to provide for
different treatment of participants whose employers
are in different withdrawal liability pools that have
been approved by PBGC.

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applies a smaller reduction to
individuals who are receiving disability
benefits under the Social Security Act
(even though they are not receiving
benefits based on disability under the
plan) than to similarly situated
individuals. The example concludes
that, under the facts, the suspension of
benefits is equitably distributed.
Although this example illustrates a
suspension under which individuals
receiving Social Security disability
benefits receive favorable treatment
(which is a standard that is easily
administrable), a suspension could
instead be designed using another
reasonable definition of disability for
this purpose.
5. Specific Limitation on Suspension for
Certain Plans
The final regulations reserve a
paragraph for rules relating to the
application of section 432(e)(9)(D)(vii),
which contains a specific limitation on
how a suspension of benefits must be
applied under a plan that includes
benefits that are directly attributable to
a participant’s service with any
employer that has, prior to December
16, 2014, withdrawn from the plan in a
complete withdrawal under section
4203 of ERISA, paid the full amount of
the employer’s withdrawal liability
under section 4201(b)(1) of ERISA or an
agreement with the plan, and, pursuant
to a collective bargaining agreement,
assumed liability for providing benefits
to participants and beneficiaries of the
plan under a separate, single-employer
plan sponsored by the employer, in an
amount equal to any amount of benefits
for these participants and beneficiaries
reduced as a result of the financial
status of the plan. The Treasury
Department and the IRS expect to adopt
final regulations under section
432(e)(9)(D)(vii) after consideration of
comments received in response to the
2016 regulations and the public hearing
on those regulations.
VI. Benefit Improvements
The final regulations generally adopt
the provisions set forth in the 2015
regulations for the application of section
432(e)(9)(E), regarding benefit
improvements. Under the final
regulations, 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
final regulations.
The final regulations define the term
benefit improvement to mean, with
respect to a plan, a resumption of
suspended benefits, an increase in

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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 Increases for
Those Not in Pay Status
The final 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 not in pay status
by the first day of the plan year for
which the benefit improvement takes
effect, unless several conditions are
satisfied.
The final regulations include
conditions that must be satisfied for the
benefit improvement to take effect. The
final regulations require that the present
value of the total liabilities for a benefit
improvement for participants and
beneficiaries in pay status (that is, those
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, the final
regulations provide that the 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
and clarify that the actuarial
assumptions and methods used for the
actuarial projections that are required
must each be reasonable, and the
combination of the actuarial
assumptions and methods must be
reasonable, taking into account the
experience of the plan and reasonable
expectations. In addition, the final
regulations clarify that, in the case of a
benefit increase that is an increase in
the rate of future accrual, the calculation
of present value of the liabilities for the
benefit improvements must take into
account the increase in accruals for
current participants for all future years.
As under the 2015 regulations, the
final regulations require that 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

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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 elsewhere in this
preamble, and the extent to which the
benefits of the participants and
beneficiaries were suspended.
Pursuant to section 432(e)(9)(E)(i)(II),
the final regulations require the plan
actuary to certify that, after taking into
account the benefit improvement, the
plan is projected to avoid insolvency
indefinitely. The final regulations
require that this certification be made
using the standards that apply for
purposes of determining whether a
suspension is sufficient to avoid
insolvency that are described in this
preamble.
The final regulations provide that
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 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 Increases for
Those in Pay Status
Under final regulations, as under the
2015 regulations, 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 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 under plans in critical status).
C. Other Limitations on Benefit
Increases
The final regulations provide that the
limitations on benefit improvements
generally apply in addition to other
limitations on benefit increases that
apply to a plan. These limitations on
benefit improvements are in addition to
the limitations in section 432(f) and any
other applicable limitations on increases

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25551

in benefits imposed on a plan. These
limitations on benefit improvements do
not apply in the case of benefits paid
following the scheduled expiration of a
temporary suspension of benefits.
One commenter asked that benefit
improvements under other plans be
treated in the same manner as benefit
improvements under the plan at issue
for purposes of satisfying the
requirement that retirees be given at
least as much as active participants with
respect to benefit improvements. Such a
requirement would not be consistent
with the terms of section 432(e)(9)(E),
and, therefore, the final regulations do
not adopt this suggestion. However, any
actions that increase liabilities with
respect to a group or groups of
individuals subject to the suspension,
even if under another plan, would result
in a use of resources that must be taken
into account in the annual plan sponsor
determination of whether all reasonable
measures have been and continue to be
taken to avoid insolvency.
VII. 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 final regulations prescribe rules
implementing the statutory notice
requirements in section 432(e)(9)(F) that
are generally the same as the rules set
forth in the 2015 regulations. The final
regulations require the plan sponsor to
provide notice of a proposed suspension
to: (i) All plan participants, beneficiaries
of deceased participants, and alternate
payees (regardless of whether their
benefits are proposed to be suspended),
except those who cannot be contacted
by reasonable efforts; (ii) each employer
that has an obligation to contribute
(within the meaning of section 4212(a)
of ERISA) under the plan; and (iii) each
employee organization that, for
purposes of collective bargaining,
represents plan participants employed
by such an employer.
The 2015 regulations contain two
examples illustrating the efforts that
constitute reasonable efforts to contact
individuals for purposes of this notice
requirement. In response to comments,
these examples have been modified in
the final regulations to describe in more
detail the steps taken to locate
participants whose notices were
returned as undeliverable. These steps
include contacting administrators of any
other employee benefit plans (such as,
to the extent such contact is permitted

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under applicable law, the administrators
of a health fund or an apprenticeship
training fund) for contact information
regarding a missing individual. As in
the 2015 regulations, these examples
demonstrate that it is not sufficient to
merely send notices to the individuals’
last known mailing addresses.
The final regulations state that, to
satisfy the statutory requirement that the
notice contain sufficient information to
enable plan participants and
beneficiaries to understand the effect of
the suspension of benefits, the notice
must contain the following items:
• An individualized estimate, on an
annual or monthly basis, of the effect of
the suspension on the participant or
beneficiary. However, to the extent it is
not possible to provide an
individualized estimate on an annual or
monthly basis of the quantitative effect
of the suspension on the participant or
beneficiary, such as in the case of a
suspension that affects the payment of
a future cost-of-living adjustment, that
effect may be reflected in a narrative
description;
• A statement that the plan sponsor
has determined that the plan will
become insolvent unless the proposed
suspension (and, if applicable, the
proposed partition) takes effect, and the
year in which insolvency is projected to
occur without a suspension of benefits
(and, if applicable, a proposed
partition);
• 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 upon
insolvency;
• A description of the proposed
suspension and its effect, including a
description of the different categories or
groups affected by the suspension, how
those categories or groups are defined,
and the formula that is used to calculate
the amount of the proposed suspension
for individuals in each category or
group;
• A description of the effect of the
proposed suspension on the plan’s
projected insolvency;
• A description of whether the
suspension will remain in effect
indefinitely or the date the suspension
will expire if it will expire by its own
terms; and
• A statement describing the right to
vote on the suspension application.
The final regulations provide that the
notice of proposed suspension may not
include false or misleading information
(or omit information so as to cause the
information provided to be misleading).
The notice is permitted to include
additional information, including

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information relating to an application
for partition under section 4233 of
ERISA, provided that it satisfies the
requirement to not provide false or
misleading information.
The notice of proposed suspension
must be written in a manner so as to be
understood by the average plan
participant.10 The regulations provide
that the Treasury Department will
provide a model notice. The use of the
model notice will satisfy the content
requirement and the readability
requirement with respect to the
language provided in the model.
The final regulations provide that
notice may be provided in writing. It
may also be provided in electronic form
to the extent that the form is reasonably
accessible to persons to whom the
notice is required to be provided.
Permissible electronic methods include
those permitted under regulations of the
Department of Labor at 29 CFR
2520.104b–1(c) and those described at
§ 54.4980F–1, Q&A–13(c) of the Excise
Tax Regulations.
Section 432(e)(9)(F) provides that the
notice of proposed suspension must be
given ‘‘concurrently’’ with the
submission of an application to the
Treasury Department, but does not
specify a precise timeframe for
satisfying this requirement. An
interpretation that ‘‘concurrently’’
means either simultaneously or on the
same day was rejected because it would
require the difficult synchronization of
the plan sponsor’s electronic
submission of its application and its
giving of notice in written and/or in
electronic form. As described in section
VIII of this preamble, the final
regulations require a plan sponsor to
submit its application electronically,
but, as described previously in this
section of the preamble, the final
regulations also allow a plan sponsor to
give notice by mail. Therefore, the final
regulations interpret ‘‘concurrently’’ to
permit the sponsor to provide written
notice a few days earlier than the
electronic submission of the application
(in order for the mailed notice and
application to be received on or about
the same date). The final regulations
thus permit a plan sponsor to give
notice no earlier than four business days
before the submission of its application.
The final regulations also provide that
a plan sponsor is permitted to give
written notice no later than two
business days after the Treasury
Department notifies the plan sponsor
that it has submitted a complete
10 See 29 CFR 2520.102–2 of the Department of
Labor regulations for rules under a similar standard
applicable to summary plan descriptions.

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application. This allows a plan sponsor
a maximum of four business days
following its submission of an
application to provide the required
notices. This four-business-day period
of time enables the Treasury Department
to make a preliminary completeness
check of the application during the first
two business days, and the plan sponsor
two business days thereafter to give the
required notices.11 This approach will
help participants by minimizing the risk
of confusion and plan expense. For
example, if a plan sponsor submits an
incomplete application, compiles the
additional information, and then finds
the individualized estimates that the
plan sponsor already gave to be
inaccurate (or simply takes too long to
compile the additional information), the
plan sponsor would have to re-send the
notices, increasing the likelihood that
the notice would not be understood by
the average plan participant as a result
of receiving two different notices, each
with a different individualized estimate.
The Treasury Department encourages
plan sponsors to delay giving notice
until after the Treasury Department
provides notification that the
application is complete. If additional
individuals who are entitled to notice
are located after the deadline for
providing notice then the plan sponsor
must give those newly located
individuals notice as soon as practicable
after they are located.
In accordance with section
432(e)(9)(F)(iv), the final regulations
provide that a notice of proposed
suspension satisfies the requirement for
notice of a significant reduction in
benefits described in section 4980F that
would otherwise be required as a result
of that suspension of benefits. To the
extent that other reductions accompany
a suspension of benefits, such as a
reduction in the future accrual rate
described in section 4980F for active
participants or a reduction in adjustable
benefits under section 432(e)(8), notice
that satisfies the requirements
(including the applicable timing
requirements) of section 4980F or
section 432(e)(8), as applicable, must be
provided.
VIII. Approval or Denial of an
Application for Suspension of Benefits
The final regulations generally adopt
the provisions of the 2015 regulations
under which the plan sponsor of a plan
in critical and declining status for a plan
year that seeks to suspend benefits must
submit an application for approval of
the proposed suspension of benefits to
11 The completeness check is described in section
VIII of this preamble.

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the Treasury Department. The Treasury
Department, in consultation with PBGC
and the Labor Department, will approve
a complete application upon finding
that: (1) The plan is eligible for the
suspension; (2) the plan actuary and
plan sponsor have satisfied the
requirements of section 432(e)(9)(C), (E),
and (F); and (3) the design of the
suspension satisfies the criteria of
section 432(e)(9)(D). The Treasury
Department’s approval of the design of
the suspension of benefits does not
constitute approval of any individual
benefit calculation for any participant or
beneficiary.
The final regulations provide that
additional guidance that may be
necessary or appropriate with respect to
applications, including procedures for
submitting applications and the
information required to be included in
a complete application, may be issued
in the form of revenue procedures,
notices, or other guidance published in
the Internal Revenue Bulletin. The
guidelines and procedures for
submitting an application that were set
forth in Rev. Proc. 2015–34 have been
updated in Rev. Proc. 2016–xx.
The final 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 final regulations
provide that, if necessary under the
circumstances, the Treasury Department
and the plan sponsor may mutually
agree in writing to stay the 225-day
period. It is expected that any such
agreement would be entered into only in
unusual circumstances.
The final regulations provide, as
required by section 432(e)(9)(G)(iv),
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 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 final regulations 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. As required by section
432(e)(9)(G)(v), in evaluating a plan
sponsor’s application, the Treasury

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Department will accept the plan
sponsor’s determinations under section
432(e)(9)(C)(ii), unless the Treasury
Department concludes, in consultation
with 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 final 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,
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.
An application must be submitted
electronically in a searchable format.
The final regulations provide that, after
receiving a submission, the plan
sponsor will be notified within two
business days whether the submission
constitutes a complete application. If
the submission is a complete
application, the application will be
treated as submitted on the date it was
originally submitted to the Treasury
Department. If a submission is
incomplete, the notification will inform
the plan sponsor of the information that
is needed to complete the submission
and give the plan sponsor a reasonable
opportunity to submit a complete
application. In such a case, the complete
application will be treated as submitted
on the date the additional information
needed to complete the application is
submitted to the Treasury Department.
The final regulations provide that in
the case of a plan sponsor that is not
submitting an application for
suspension in combination with an
application to PBGC for a plan partition,
the application for suspension generally
will not be accepted unless the
proposed effective date of the
suspension is at least nine months after
the date on which the application is

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25553

submitted. However, in appropriate
circumstances, an earlier effective date
may be permitted. Appropriate
circumstances could include an
application for a proposed suspension
that is a revision of a previously
proposed suspension.
Some commenters asserted that an
earlier effective date of a suspension
should be permitted because the size of
the benefit cuts pursuant to the
suspension might be smaller with an
earlier effective date. The purpose of the
general nine month requirement is to
ensure adequate time to review the
proposed suspension without a need to
delay the effective date of the proposed
suspension. Deferring the original
effective date could have other
repercussions on the proposed
suspension, including confusion for
plan participants and beneficiaries.
Furthermore, deferring the effective date
would change the economics of the
suspension. For example, it could result
in the application of the age-based
limitation to additional participants.
This in turn could lead to greater
reductions in the benefits of other
individuals in order to satisfy the
requirement that the suspension, in the
aggregate, be reasonably estimated to
achieve, but not materially exceed, the
level necessary to avoid insolvency.
Accordingly, no change has been made
in the final regulations to this provision.
In the case of an application for
suspension in combination with an
application for partition, the impact of
a delayed effective date for the
suspension would be the potential that
PBGC’s ability to provide the plan with
sufficient financial assistance to keep
the plan solvent would be impaired
(rather than a redesign of the
suspension). Accordingly, the final
regulations do not require the proposed
effective date of such a suspension to be
at least nine months after the date on
which the application is submitted.
The final regulations provide that, in
any case in which a suspension of
benefits with respect to a plan is made
in combination with a partition of the
plan under section 4233 of ERISA, the
suspension of benefits is not permitted
to take effect prior to the effective date
of the partition. This requirement will
not be satisfied if the partition order
under section 4233 of ERISA has not
been provided to the Treasury
Department by the last day of the 225day review period described in section
432(e)(9)(G)(iii), after which deemed
approval of the suspension would
occur. The final regulations clarify that
a conditional approval by PBGC of a
partition application that is conditioned
only on the Treasury Department’s

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issuing a final authorization to suspend
is treated as a partition order.
The final regulations generally adopt
other provisions from the 2015
regulations, with respect to the
application process. The final
regulations provide that, no later than
30 days after receiving a complete
application, the application will be
published on the Web site of the
Department of the Treasury, and the
Treasury Department will publish a
notice in the Federal Register soliciting
comments from contributing employers,
employee organizations, and
participants and beneficiaries of the
plan for which an application was
made, and other interested parties. In
addition, the final regulations provide
that the notice soliciting comments will
generally request that comments be
submitted no later than 45 days after
publication of that notice in the Federal
Register, but the notice may specify a
different deadline for comments in
appropriate circumstances.
(Circumstances under which a shorter
comment period may be appropriate
include the receipt of an application for
a proposed suspension that is a revision
of a previously proposed suspension.)
Comments received in response to such
a solicitation will be made publicly
available.
The final regulations include a new
rule that, in appropriate circumstances,
the Treasury Department may permit a
plan sponsor that has withdrawn an
application to submit a revised
application for suspension that will be
subject to a different review process
(referred to in the regulations as the
resubmission review process). The
Treasury Department will follow the
same procedures and apply the same
standards in the resubmission review
process as in the review of any other
application, except: (1) The revised
application would be permitted to
propose an effective date of the
suspension that is less than nine months
after the revised application is
submitted; (2) the individual and
aggregate limitations under section
432(e)(9)(D) may be applied using the
same actuarial data (including the same
fair market value of the plan assets) as
was used in the initial application; and
(3) the plan sponsor would be permitted
to provide a simplified version of the
notice of the revised application to any
individual for whom the amount and
timing of the proposed suspension
under the revised application are the
same as under the withdrawn
application.
Whether to make the resubmission
review process available for a particular
application is within the Treasury

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Department’s discretion, in consultation
with PBGC and the Labor Department.
In determining whether there are
appropriate circumstances that warrant
the resubmission review process, the
Treasury Department will, for example,
evaluate whether such resubmission
review would enable it to make
significant use of its prior analysis of the
withdrawn application. Specifically, the
Treasury Department expects to take
into consideration one or more factors,
including: (1) The extent to which the
Treasury Department, in consultation
with PBGC and the Labor Department,
had evaluated the application prior to
withdrawal; (2) the amount of time that
has or will have elapsed since the
submission of the withdrawn
application; and (3) the extent to which
the experience of the plan has been
different than expected since the
submission of the withdrawn
application, including the extent of
changes in the fair market value of plan
assets, changes in the number of
disabled participants (as defined under
the plan), or withdrawals or bankruptcy
proceedings filed by employers
contributing to the plan.
As under the 2015 regulations, the
final regulations provide that if the
Treasury Department denies a plan
sponsor’s application, the notification of
the denial will detail the specific
reasons for the denial, including
reference to the specific requirement not
satisfied. If the Treasury Department
approves a plan sponsor’s application
and expects that the plan is a
systemically important plan, then the
Treasury Department will notify the
plan sponsor of that expectation and
that the plan sponsor will be required to
provide individual participant data and
actuarial analysis upon request. This
information would be used in the event
the vote results in the rejection of the
suspension and would assist the
Treasury Department in determining
whether to permit an implementation of
the rejected suspension or a
modification of that suspension.
The final regulations provide that the
Secretary of the Treasury may appoint a
Special Master for purposes of section
432(e)(9). If a Special Master is
appointed, the Special Master will be an
employee of the Department of the
Treasury, will coordinate the
implementation of the regulations and
the review of applications for the
suspension of benefits and other
appropriate documents, and will
provide recommendations to the
Secretary of the Treasury with respect to
decisions required under these
regulations.

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IX. Participant Vote on Proposed Benefit
Reduction
A participant vote requires the
completion of three steps. First, a
package of ballot materials is distributed
to eligible voters. Second, the eligible
voters cast their votes and the votes are
collected and tabulated. Third, the
Treasury Department (in consultation
with PBGC and the Labor Department)
determines whether a majority of the
eligible voters has voted to reject the
proposed suspension.
A. Eligible Voters and Voting Roster
The 2015 regulations define the term
‘‘eligible voters’’ as all plan participants
and all beneficiaries of deceased
participants. Some commenters noted
that the reference to participants in this
provision could be interpreted as
referring only to active participants.
Accordingly, these final regulations
clarify that eligible voters include
terminated vested participants and
retirees (but not alternate payees).
These final regulations add the term
‘‘voting roster’’ to describe the list of
eligible voters to whom the ballot must
be sent. The plan sponsor must prepare
the voting roster that includes those
eligible voters to whom the notices were
sent. If there is a plan participant or
beneficiary who did not receive a notice
but who is subsequently located by the
plan sponsor, the final regulations
require that individual to be included
on the voting roster. Similarly, if an
individual becomes a plan participant
after the date the notices were sent, then
the individual must be included on the
voting roster. If a plan sponsor learns
that an eligible voter has died, then that
deceased individual must not be
included on the voting roster (but if that
participant has a beneficiary entitled to
benefits under the plan, the beneficiary
must be included on the roster).
B. Service Provider May Be Designated
As under the 2015 regulations, these
final regulations provide that the
Treasury Department is permitted to
designate a service provider or service
providers to facilitate the administration
of the vote. The service provider may
assist in the steps of distributing the
ballot package to eligible voters and
collecting and tabulating the votes. If a
service provider is designated to collect
and tabulate votes, then the service
provider will provide the Treasury
Department with the report of the
results of the vote, which includes an
accounting of the number of eligible
voters who voted, the number of eligible
voters who voted in support of and to

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reject the suspension, and certain other
information.
C. Ballots and Other Plan Sponsor
Communications
These final regulations set forth rules
regarding the ballot package that is sent
to eligible voters and the plan sponsor’s
responsibilities relating to ballots and
related communications to participants
and beneficiaries. The final regulations
provide that the ballot must be
approved by the Treasury Department,
in consultation with PBGC and the
Labor Department, and that the ballot
must be written in a manner that can be
readily understood by the average plan
participant and may not include any
false or misleading information. Under
the final regulations, the ballot package
sent to eligible voters includes the
approved ballot and a voter
identification code for each eligible
voter. The voter identification code,
which is assigned by the Treasury
Department or a designated service
provider, is intended to ensure the
validity of the vote while maintaining
the eligible voters’ privacy in the voting
process.
These final regulations provide
guidance on the plan sponsor’s statutory
requirement to provide a ballot. Because
the ballot for each eligible voter is
accompanied by a voter identification
code, the plan sponsor cannot directly
distribute the ballots. Instead, the plan
sponsor is responsible for furnishing the
voting roster so that the Treasury
Department or its designated service
provider can distribute the ballots on
the plan sponsor’s behalf. For each
eligible voter on the voting roster, the
plan sponsor must include the last
known mailing address (except with
respect to those eligible voters for whom
the last known mailing address is
known to be incorrect). The plan
sponsor must also provide a list of
eligible voters whom the plan sponsor
has been unable to locate using
reasonable efforts. In addition, the plan
sponsor must furnish current electronic
mailing addresses for certain eligible
voters (that is, those who received the
notice of the proposed suspension
under section 432(e)(9)(F) in electronic
form and those who regularly receive
plan-related electronic communications
from the plan sponsor). The plan
sponsor must also furnish the
individualized estimates provided to
eligible voters as part of the earlier
notices described in section 432(e)(9)(F)
(or, if an individualized estimate is no
longer accurate for an eligible voter, a
corrected version of that estimate) so
that an individualized estimate can be
included with the ballot for each

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eligible voter. These final regulations
add a requirement for the plan sponsor
to provide plan information (such as
participant identification codes used by
the plan) to enable the Treasury
Department to verify the identity of each
eligible voter, in order to ensure the
integrity of the voting process. These
materials must be provided no later than
seven days after the date the Treasury
Department has approved an
application for a suspension of benefits.
Section 432(e)(9)(H)(iii) requires a
plan sponsor to provide a ballot. These
final regulations adopt the
interpretation set forth in the 2015
regulations that, under this statutory
requirement, the plan sponsor is
responsible for the costs of providing
the ballot package to eligible voters,
including the costs associated with
printing, assembling, and mailing those
ballot packages.
The final regulations provide that
ballot packages will be distributed to
eligible voters by first-class U.S. mail. A
supplemental copy of the ballot package
that includes the same content as the
mailed ballot package may also be sent
by an electronic communication to an
eligible voter who has consented to
receive electronic notifications. For
example, if an eligible voter notifies the
Treasury Department or the designated
service provider that the mailed ballot
package has not been received, then a
supplemental copy of the ballot package
may be provided by electronic mail.
The final regulations provide
guidance regarding the plan sponsor’s
duty under section 432(e)(9)(H)(iv) to
communicate with eligible voters.
Under the final regulations, the plan
sponsor must notify certain eligible
voters (using an electronic
communication) that the ballot package
will be mailed to them by first-class U.S.
mail. The eligible voters who must be
notified under this rule are those who
received the notice of the proposed
suspension under section 432(e)(9)(F) in
electronic form and those who regularly
receive plan-related electronic
communications from the plan
sponsor.12 This notification must be
sent promptly after the plan sponsor is
informed of the ballot distribution date.
This notification in electronic form
ensures that those eligible voters who
ordinarily expect to receive
communications from the plan sponsor
in electronic form are aware that a ballot
package will arrive via first-class U.S.
mail. This notification must be sent by
the plan sponsor, rather than the
12 The plan sponsor is also permitted to send this
notification to any other eligible voters for whom
the plan sponsor has an electronic mailing address.

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Treasury Department or a service
provider, so that the communication
comes from a familiar source, which
will make it less likely that the
communication is filtered from delivery
as spam or junk mail.
As previously described in section VII
of this preamble, a plan sponsor must
make reasonable efforts to contact
individuals whose initial suspension
notices that were provided by mail were
returned as undeliverable. The mailing
addresses for the ballot packages that
are furnished by the plan sponsor must
reflect updates resulting from those
reasonable efforts. If ballot packages
sent to eligible voters are returned as
undeliverable, the plan sponsor must
make similar reasonable efforts to locate
those eligible voters after being notified
that their ballots were returned as
undeliverable.
D. Contents of Ballot
The final regulations provide that the
ballot must be written in a manner that
can be readily understood by the
average plan participant and may not
include any false or misleading
information. The ballot must contain the
following information:
• 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
consultation with 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;

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• 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
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
of the 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.
These final regulations provide that
the statement in opposition to the
proposed suspension that is compiled
from comments received on the
application will be prepared by the
Labor Department. The final regulations
provide that this statement in
opposition must be written in a manner
that is readily understandable to the
average plan participant. If there are no
comments in opposition to the proposed
suspension, then the statement in
opposition will indicate that there were
no such comments.
Model language for use in the ballot
may be published in the form of a
revenue procedure, notice, or other
guidance published in the Internal
Revenue Bulletin.
E. Timing Rules for the Participant Vote
In accordance with section
432(e)(9)(H)(ii), the final regulations
require that the Treasury Department (in
consultation with PBGC and the Labor
Department) administer the participant
vote no later than 30 days following the
date of approval of an application for a
suspension of benefits. The final
regulations interpret the term
‘‘administer a vote’’ to mean that
eligible voters must have the
opportunity to vote beginning no later
than 30 days following approval of the
application, but the regulations do not

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require voting to be completed within
that 30-day time frame. Accordingly,
ballot packages must be distributed no
later than 30 days after the application
has been approved, and the voting
period (the period during which a vote
received from an eligible voter will be
counted) begins on the ballot
distribution date. Although ballot
packages may be distributed at any time
up to 30 days following approval of an
application for suspension of benefits, it
is generally expected that ballot
packages will be distributed well before
that deadline.
The final regulations specify that the
voting period generally will remain
open until the 30th day following the
date the Treasury Department approves
the application for a suspension of
benefits. However, the voting period
will not close earlier than 21 days after
the ballot distribution date. In addition,
the Treasury Department (in
consultation with PBGC and the Labor
Department) is permitted to specify a
later end to the voting period in
appropriate circumstances. For
example, an extension might be
appropriate if, near the end of the
original voting period, there are
significant technical difficulties with
respect to the collection of votes and
those technical difficulties are not
resolved in time to provide eligible
voters with sufficient time to cast their
votes.
F. Methods for Casting Votes
The final regulations specify that an
automated voting system must be made
available to the eligible voters under
which each eligible voter who furnishes
a voter identification code must be able
to cast a vote to be tabulated by the
automated voting system. Such a system
must be designed to record votes both
electronically (through a Web site) and
telephonically (through a toll-free
number that allows votes to be cast
using both a touch-tone voting system
and an interactive voice response
system). Because the system includes
interactive voice response capability,
eligible voters can cast votes on their
home phones (including rotary phones)
and all types of mobile phones
(including phones that cannot access
the internet). This type of system will
permit any voter who lacks internet
access or, for any reason, is unwilling or
unable to vote via a Web site, to cast a
vote using a toll-free number.
A number of commenters to the 2015
regulations requested that eligible voters
be permitted to cast votes by mail. In
response to these comments, the final
regulations provide that, in appropriate
circumstances, the Treasury Department

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may, in consultation with PBGC and the
Labor Department, allow voters to cast
votes by mail in lieu of using the
automated voting system.13 If voters are
permitted to cast votes by mail then the
ballot package must include a postage
prepaid, return addressed envelope for
use in returning the completed ballot.
G. General Procedures Following the
Vote
Under section 432(e)(9)(H)(ii), a
proposed suspension is generally
permitted to be implemented unless
rejected by a majority vote of all eligible
voters. Numerous commenters
expressed dissatisfaction with this
statutory provision, and several
commenters suggested that the
regulations require a majority of eligible
voters to vote in favor of a suspension
before it is permitted to take effect. The
Treasury Department and the IRS have
not adopted this suggestion because it is
inconsistent with the statutory language.
As under the 2015 regulations, the
final regulations provide that, for
purposes of determining whether a
majority of all eligible voters have voted
to reject the suspension under section
432(e)(9)(H)(ii), any eligible voters to
whom ballots have not been provided
(because the individuals could not be
located) are 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.
In accordance with section
432(e)(9)(H)(ii), the final regulations
require that an approved suspension
will be permitted to take effect unless a
majority of all eligible voters vote to
reject the suspension. If a majority of all
eligible voters vote to reject the
suspension, the suspension will not be
permitted to take effect (except that, as
described in section IX.H of this
preamble, the suspension or a modified
suspension will be permitted to go into
effect if the plan is a systemically
important plan). A plan sponsor is
permitted to submit a new suspension
application to the Treasury Department
for approval in any case in which a
suspension is prohibited from taking
effect as a result of a vote.
H. Special Rules for Systemically
Important Plans
The final regulations set forth rules
for systemically important plans that are
generally the same as the rules set forth
in the 2015 regulations. The final
regulations provide that if a majority of
all eligible voters vote to reject the
13 If a mail-in ballot is permitted then it must be
received before the end of the voting period in order
to be considered.

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suspension, the Treasury Department
will consult with PBGC and the Labor
Department to determine if the plan is
a systemically important plan. The
Treasury Department is required to
make this determination no later than
14 days after the results of the vote are
certified.
The final regulations provide that the
Participant and Plan Sponsor Advocate
selected under section 4004 of ERISA
may, in the case of a systemically
important plan, submit
recommendations to the Treasury
Department with respect to an approved
suspension (or any modifications to an
approved suspension). Under the 2015
regulations, the Participant and Plan
Sponsor Advocate was given up to 30
days after the Treasury Department’s
determination that the plan is
systemically important to make this
recommendation. The final regulations
change this deadline to give the
Participant and Plan Sponsor Advocate
up to 44 days after the results of the
participant vote are certified to submit
any recommendations. This 44-day
period provides the Participant and Plan
Sponsor Advocate with 30 days
following the Treasury Department’s
determination to make its
recommendations if the Treasury
Department uses the entire 14 days to
determine that plan is a systemically
important plan (and provides the
Participant and Plan Sponsor Advocate
a longer time if the Treasury Department
makes its determination at an earlier
date).
As under the 2015 regulations, the
final regulations provide that if a plan
is a systemically important plan for
which a majority of all eligible voters
vote to reject the suspension then, as
required under section 432(e)(9)(H)(v),
the Treasury Department will either
permit the implementation of the
suspension that was rejected by the vote
or permit the implementation of a
modification of that suspension. Under
any such modification, the plan must be
projected to avoid insolvency in
accordance with section 432(e)(9)(D)(iv).
No later than 60 days after the results of
a vote to reject a suspension are
certified, the Treasury Department will
notify the plan sponsor that the
suspension (or a modified suspension)
is permitted to be implemented.
The final regulations adopt the
definition of a systemically important
plan from the 2015 regulations, with a
minor clarification. Under the final
regulations, a systemically important
plan is a plan with respect to which
PBGC projects that the present value of
its financial assistance payments will
exceed $1.0 billion if the suspension is

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not implemented. The final regulations
clarify that this $1.0 billion threshold is
indexed for inflation.
I. Final Treasury Department
Authorization or Notification Following
the Vote
As under the 2015 regulations, the
final regulations provide that in any
case in which a proposed suspension (or
a modification of a proposed
suspension) is permitted to go into
effect, the Treasury Department, in
consultation with PBGC and the Labor
Department, will issue a final
authorization to suspend with respect to
the suspension. If a suspension is
permitted to go into effect following a
vote, the final authorization will be
issued no later than seven days after the
vote. If a suspension is permitted to go
into effect following a determination
that the plan is a systemically important
plan, the final authorization will be
issued at a time sufficient to allow the
implementation of the suspension prior
to the end of the 90-day period
beginning on the date the results of the
vote rejecting the suspension are
certified. Under the final regulations, no
later than 60 days after the certification,
the Treasury Department will notify the
plan sponsor that the suspension that
was rejected by the vote or a modified
suspension is permitted to be
implemented.
Effective/Applicability Dates
These regulations are effective on
April 28, 2016. The final regulations
under § 1.432(e)(9)–1 apply with respect
to suspensions for which the approval
or denial is issued on or after April 26,
2016. In the case of a systemically
important plan, the final regulations
apply with respect to any modified
suspension implemented on or after that
date.
Statement of Availability of IRS
Documents
IRS Revenue Procedures, Revenue
Rulings notices, and other guidance
cited in this document are published in
the Internal Revenue Bulletin (or
Cumulative Bulletin) and are available
from the Superintendent of Documents,
U.S. Government Printing Office,
Washington, DC 20402, or by visiting
the IRS Web site at http://www.irs.gov.
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

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25557

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, the notice of proposed rulemaking
preceding these regulations was
submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on its
impact on small business.
Contact Information
For general questions regarding these
regulations, please contact the
Department of the Treasury MPRA
guidance information line at (202) 622–
1559 (not a toll-free number). For
information regarding a specific
application for a suspension of benefits,
please contact the Department of the
Treasury at (202) 622–1534 (not a tollfree number).
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
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 * * *

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. Subject to
section 432(e)(9)(B) through (I) and this
section, the plan sponsor of a
multiemployer plan that is in critical
and declining status (within the
meaning of section 432(b)(6)) for a plan

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year may, by plan amendment adopted
in the plan year, implement a
suspension of benefits that the plan
sponsor deems appropriate. Such an
amendment is permitted
notwithstanding the anti-cutback
provisions of section 411(d)(6). As
amended, the terms of the plan must
satisfy the requirements of section
401(a).
(2) Adoption of plan terms
inconsistent with suspension
requirements—(i) General rule. A plan
may implement (or continue to
implement) a reduction of benefits
pursuant to a suspension of benefits
only if the terms of the plan are
consistent with the requirements of
section 432(e)(9) and this section.
(ii) Changes in level of suspension—
(A) Phased-in 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.
(B) Level of suspension contingent on
future events. Except as otherwise
provided in this paragraph (a)(2)(ii), 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 a suspension of benefits is
decreased if the plan’s funded status
improves (except upon a failure to
satisfy the annual plan sponsor
determinations requirement of
paragraph (c)(4) of this section).
(C) Level of suspension contingent on
future status of individual. A plan’s
terms are not inconsistent with the
requirements of section 432(e)(9) merely
because they provide that, for a
participant who has not commenced
benefits before the effective date of the
suspension, the amount of the
suspension will change upon the
occurrence of a specified future event,
condition or development (such as
retirement, death, or disability) with
respect to the participant.
(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

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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 prescribes certain 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
certain limitations on suspensions of
benefits. Paragraph (e) of this section
prescribes rules relating to benefit
improvements. 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
certain requirements with respect to 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.
Paragraph (j) of this section provides the
effective/applicability date of this
section.
(4) Definitions. The following
definitions apply for purposes of this
section—
(i) Pay status. A person is in pay
status under a multiemployer plan if, as
described in section 432(j)(6), at any
time during the current plan year, the
person is a participant, beneficiary, or
alternate payee under the plan and is
paid an early, late, normal, or disability
retirement benefit under the plan (or a
death benefit under the plan related to
a retirement benefit).
(ii) Plan sponsor. The term plan
sponsor means the association,
committee, joint board of trustees, or
other similar group of representatives of
the parties that establishes or maintains
the multiemployer plan. However, in
the case of a plan described in section
404(c), or a continuation of such a plan,
the term plan sponsor means the
association of employers that is the
employer settlor of the plan.
(iii) Effective date of suspension of
benefits—(A) Individuals who are
receiving benefits. In the case of a
suspension affecting an individual who
is receiving benefits when the
suspension is implemented, the
effective date of a suspension of benefits
is the first date as of which any portion
of the individual’s benefits are not paid
as a result of the suspension.
(B) Individuals who are not receiving
benefits. In the case of a suspension
affecting individuals other than
individuals described in paragraph
(a)(4)(iii)(A) of this section, the effective

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date of the suspension is the first date
as of which the individual’s entitlement
to benefits is reduced as a result of the
implementation of the suspension,
regardless of whether the individual is
eligible to commence benefits at that
date.
(C) 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, then the effective
date of the first reduction will be treated
as the effective date of all subsequent
reductions pursuant to that suspension.
(D) 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—(1) In
general—(i) Definition. For purposes of
this section, the term suspension of
benefits means the temporary or
permanent reduction, pursuant to the
terms of the plan, of any current or
future payment obligation of the plan
with respect to any plan participant. A
suspension of benefits may apply with
respect to a plan participant regardless
of whether the participant, beneficiary,
or alternate payee commenced receiving
benefits before the effective date of the
suspension of benefits.
(ii) Plan not liable for suspended
benefits. If a plan pays a reduced level
of benefits pursuant to a suspension of
benefits that complies with the
requirements of section 432(e)(9) and
this section, then the plan is not liable
for any benefits not paid as a result of
the suspension.
(2) Length of suspension—(i) In
general. A suspension of benefits may
be of indefinite duration or may expire
as of a date that is specified in the plan
amendment implementing the
suspension.
(ii) Effect of a benefit improvement. A
plan sponsor may amend the plan to
eliminate some or all of a suspension of
benefits, provided that the amendment
satisfies the requirements that apply to
a benefit improvement under section
432(e)(9)(E), in accordance with the
rules of paragraph (e) of this section.

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(3) Treatment of beneficiaries and
alternate payees. Except as otherwise
specified in this section, all references
to suspensions of benefits, increases in
benefits, or resumptions of suspended
benefits with respect to participants also
apply with respect to benefits of
beneficiaries or alternate payees (as
defined in section 414(p)(8)) of
participants.
(4) Retiree representative—(i) In
general—(A) Requirement to select
retiree representative. The plan sponsor
of a plan that intends to submit an
application for a suspension of benefits
and that has reported a total of 10,000
or more participants as of the end of the
plan year for the most recently filed
Form 5500, Annual Return/Report of
Employee Benefit Plan, must select a
retiree representative. The plan sponsor
must select the retiree representative at
least 60 days before the date the plan
sponsor submits an application to
suspend benefits. The retiree
representative must be a plan
participant who is in pay status. The
retiree representative may or may not be
a plan trustee.
(B) Role of retiree representative. The
role of the retiree representative is to
advocate for the interests of the retired
and deferred vested participants and
beneficiaries of the plan, beginning
when the retiree representative is
selected and continuing throughout the
suspension approval process. In the
discretion of the plan sponsor, the
retiree representative may continue in
this role throughout the period of the
benefit suspension.
(ii) Reasonable expenses from plan.
The plan must pay reasonable expenses
incurred by the retiree representative,
including reasonable expenses for legal
and actuarial support and
communication with retired and
deferred vested participants and
beneficiaries, commensurate with the
plan’s size and funded status.
(iii) Disclosure of information. Upon
request, the plan sponsor must promptly
provide the retiree representative with
relevant information, such as plan
documents and data, that is reasonably
necessary to enable the retiree
representative to perform the role
described in paragraph (b)(4)(i)(B) of
this section.
(iv) Special rules relating to fiduciary
status. See section 432(e)(9)(B)(v)(III) for
rules relating to the fiduciary status of
a retiree representative.
(v) Retiree representative for other
plans. The plan sponsor of a plan that
has reported fewer than 10,000
participants as of the end of the plan
year for the most recently filed Form
5500, Annual Return/Report of

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Employee Benefit Plan is permitted to
select a retiree representative. The rules
in this paragraph (b)(4) (other than the
rules in the first two sentences of
paragraph (b)(4)(i)(A) of this section
concerning the size of the plan and the
timing of the appointment of the retiree
representative) apply to such a
representative.
(c) Conditions for suspension—(1) In
general—(i) Actuarial certification and
initial plan sponsor determinations. The
plan sponsor of a plan in critical and
declining status for a plan year may
suspend benefits only if the actuarial
certification requirement in paragraph
(c)(2) of this section and the initial plan
sponsor determinations requirement in
paragraph (c)(3) of this section are met.
(ii) Annual requirement to make plan
sponsor 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. A plan
satisfies the actuarial certification
requirement of this paragraph (c)(2) if,
taking into account the proposed
suspension of benefits (and, if
applicable, a proposed partition of the
plan under section 4233 of the
Employee Retirement Income Security
Act of 1974, Public Law 93–406 (88 Stat.
829 (1974)), as amended (ERISA)), the
plan’s actuary certifies that the plan is
projected to avoid insolvency within the
meaning of section 418E, assuming the
suspension of benefits continues until it
expires by its own terms or if no such
expiration date is set, indefinitely.
(3) Initial plan sponsor
determinations—(i) General rule. A plan
satisfies the initial plan sponsor
determinations requirement of this
paragraph (c)(3) only if the plan sponsor
determines that—
(A) All reasonable measures to avoid
insolvency, within the meaning of
section 418E, have been taken; and
(B) The plan would not be projected
to avoid insolvency (determined using
the standards described in paragraphs
(d)(5)(ii), (iv), and (v) of this section) if
no suspension of benefits were applied
under the plan.
(ii) Factors. In making its
determination that all reasonable
measures to avoid insolvency, within
the meaning of section 418E, have been
taken, the plan sponsor may take into
account the following non-exclusive list
of factors—
(A) Current and past contribution
levels;

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25559

(B) Levels of benefit accruals
(including any prior reductions in the
rate of benefit accruals);
(C) Prior reductions (if any) of
adjustable benefits;
(D) Prior suspensions (if any) of
benefits under this section;
(E) The impact on plan solvency of
the subsidies and ancillary benefits
available to active participants;
(F) Compensation levels of active
participants relative to employees in the
participants’ industry generally;
(G) Competitive and other economic
factors facing contributing employers;
(H) The impact of benefit and
contribution levels on retaining active
participants and bargaining groups
under the plan;
(I) The impact of past and anticipated
contribution increases under the plan
on employer attrition and retention
levels; and
(J) Measures undertaken by the plan
sponsor to retain or attract contributing
employers.
(iii) Reliance on certification of
critical and declining status. For
purposes of the insolvency projection
under paragraph (c)(3)(i)(B) of this
section, a plan sponsor may rely on the
actuarial certification made pursuant to
section 432(b)(3)(A)(i) that the plan is in
critical and declining status for the plan
year in making the determination that
the plan is projected to become
insolvent unless benefits are suspended.
(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 would not be 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) if no suspension of
benefits were applied under 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 plan
sponsor determinations made under this
paragraph (c)(4). The written record
must be included in an update to the
rehabilitation plan, whether or not there

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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).
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 plan
sponsor determinations. If a plan
sponsor fails to satisfy the annual plan
sponsor 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. Any suspension of benefits
with respect to a participant made by a
plan sponsor pursuant to this section is
subject to the individual limitations of
sections 432(e)(9)(D)(i) through (iii) and
paragraphs (d)(2) through (d)(4) of this
section. After applying those provisions,
the overall size and distribution of the
suspension is subject to the aggregate
limitations of sections 432(e)(9)(D)(iv)
and (vi) and paragraphs (d)(5) and (d)(6)
of this section. See section
432(e)(9)(D)(vii) and paragraph (d)(8) of
this section for additional rules
applicable to certain plans.
(2) Guarantee-based limitation—(i)
General rule. The reduction with respect
to a participant under a suspension of
benefits must be limited so that, on and
after the effective date of the
suspension, the monthly benefit is not
less than the guarantee-based limitation.
The guarantee-based limitation is 110
percent of the monthly benefit payable
to a participant, beneficiary, or alternate
payee that would be guaranteed by the
Pension Benefit Guaranty Corporation
(PBGC) under section 4022A of ERISA
if the plan were to become insolvent as
of the effective date of the suspension.
(ii) PBGC guarantee. Under section
4022A of ERISA, the monthly benefit of
a participant or beneficiary that would
be guaranteed by 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

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(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
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 under 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
immediately prior to the effective date of the
suspension. 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

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reduce the participant’s benefits, determined
on and after the effective date of the
suspension, 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, immediately
prior to the effective date of the suspension,
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
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, determined
on and after the effective date of the
suspension, below the guarantee-based
limitation, which is equal to 110% of the
monthly amount of guarantee payable by
PBGC. That monthly guarantee-based
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 a particular early retirement age and
permits participants to receive an early
retirement benefit beginning at that age in the
form of a social security level income option.
The participant has elected the social
security level income option under which 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).

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(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, determined
on and after the effective date of the
suspension, below the guarantee-based
limitation, which is equal to 110% of the
monthly amount of guarantee payable by
PBGC. That monthly guarantee-based
limitation amount is $900.63 ($818.75 × 1.1
= $900.63) before normal retirement age 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
monthly benefit the participant is receiving
immediately before the effective date of the
suspension 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, determined
on and after the effective date of the
suspension, below the guarantee-based

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limitation, which is equal to 110% of the
monthly amount of guarantee payable by
PBGC. That monthly guarantee-based
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.
Pursuant to the age-based limitation of
this paragraph (d)(3), no suspension of
benefits is permitted to apply to a
participant or beneficiary 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
includes the effective date of the
suspension.
(ii) Limited suspension for
participants and beneficiaries between
ages 75 and 80. Pursuant to the agebased limitation of this paragraph (d)(3),
no more than the applicable percentage
of the maximum suspendable benefit
may be suspended for a participant or
beneficiary 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 of 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

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25561

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
of 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 as of the end of the
month that includes 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 dies before the
effective date of the suspension, the
beneficiary is treated as having
commenced benefits on that date.
(vii) Rules for alternate payees. The
age-based limitation of 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 end of the month that includes 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 end of the month that
includes 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

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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 generally
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
10, 2017, and turns 80 on December 10, 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 the amount of reduction
that would apply pursuant to the 30%
suspension ($450) or the amount of reduction
that would be permitted under the guaranteebased limitation ($398.90)).
(iii) Applicable percentage. Because the
retiree is between ages 75 and 80 on the
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 20, 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

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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 the amount
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 as of the end of the month
that includes 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
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 end of the
month that includes 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 end
of the month that includes the effective date
of the suspension, because the contingent
beneficiary had not yet commenced benefits
on that date. The beneficiary’s postsuspension benefit may not be less than the
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.

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(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 as of 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 as of the end of the month that includes
the effective date of the suspension.

(4) Disability-based limitation—(i)
General rule. Pursuant to the disabilitybased limitation of this paragraph (d)(4),
benefits based on disability (as defined
under the plan) may not be suspended.
(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, then 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 periodic payment to the
participant of retirement benefits 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

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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 retirement benefit of $1,000 per
month is a benefit based on disability
because it does not exceed the benefit based
on disability that the participant was
receiving immediately before commencing
retirement benefits. 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
$1,000 per month. After age 65, the
participant’s entire retirement benefit of $850
per month is a benefit based on disability
because it does not exceed the benefit based
on disability that the participant was
receiving immediately before commencing
retirement benefits. 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 of retirement benefits to the

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participant under the plan determined
without regard to the suspension ($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 were
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
periodic payment of retirement benefits
determined without regard to the suspension.
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
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.

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25563

(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
extended period using the deterministic
projection described in paragraph
(d)(5)(ii)(A)(1) of this section exceeds
100 percent, that projection shows that,
during each of the last five plan years
of that period, neither the plan’s
solvency ratio nor its available resources
(as defined in section 418E(b)(3)) is
projected to decrease.
(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.

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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
would not be sufficient to enable the
plan to satisfy the requirement to avoid
insolvency under paragraph (d)(5)(i)(A)
of this section (determined using an
extended period that is no shorter than
the extended period used to satisfy the
requirements of paragraph (d)(5)(i)(A) of
this section). The alternative suspension
of benefits that is used for this purpose
is a suspension of benefits under which,
for each participant or beneficiary, the
amount of the reduction in the periodic
payment (determined after application
of the individual limitations) is equal to
the amount of the reduction proposed
for that participant or beneficiary in the
application submitted pursuant to
paragraph (g) of this section, decreased
(but not below zero) by the greater of—
(1) Five percent of the amount of the
reduction in the periodic payment
proposed for that participant or
beneficiary; or
(2) Two percent of the amount of the
participant’s or beneficiary’s periodic
payment determined without regard to
the reduction proposed in the
application.
(B) Special rule for partitions. If 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. Each of the actuarial

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assumptions and methods used for the
actuarial projections that are required
under this paragraph (d)(5), and the
combination of those actuarial
assumptions and methods, must be
reasonable, taking into account the
experience of the plan and reasonable
expectations. To be reasonable, the
actuarial assumptions and methods
must also be appropriate for the purpose
of the measurement (this means that
factors specific to the measurements
must be taken into account). 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 an actuarial
assumption used for the deterministic
projection in paragraph (d)(5)(ii)(A)(1)
of this section differs from that used to
certify whether the plan is in critical
and declining status pursuant to section
432(b)(3)(B)(iv), an explanation of the
information and analysis that led to the
selection of that different assumption
must be provided. Similarly, to the
extent that an actuarial assumption used
for the stochastic projection in
paragraph (d)(5)(ii)(A)(2) of this section
differs from that used for the
deterministic projection, an explanation
of the information and analysis that led
to the selection of that different
assumption 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 plan
assets as of the end of the calendar
quarter immediately preceding the date
the application is submitted;
(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

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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 those
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
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 future contribution base
units. These alternatives are that 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

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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.
(E) Permitted simplification of certain
projections. It is permissible for the
projections described in paragraph
(d)(5)(vi)(C) of this section to be made
without reflecting any adjustments to
the projected benefit payments that
result from the alternative assumptions
regarding future contribution base units.
(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 provides for
different treatment for different
participants and beneficiaries (other
than as a result of application of the
individual limitations), then the
suspension of benefits is equitably
distributed across the participant and
beneficiary population only if—
(A) Under the suspension, the
participants and beneficiaries are
divided into separate categories or
groups that are defined by the consistent
treatment of individuals within each
separate category or group;
(B) Any difference in treatment under
the suspension of benefits 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
those relevant factors.
(ii) Factors that may be considered—
(A) In general. In accordance with
paragraph (d)(6)(i)(B) and (C) of this
section, if, under the suspension, there
is any difference between the treatment
of one category or group of participants
and beneficiaries and another category
or group of participants and
beneficiaries, that difference must be
based on a reasonable application of
relevant 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

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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
treatment under a suspension of benefits
include, when reasonable under the
circumstances, the following statutory
factors:
(1) The age and life expectancy of the
participant 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;
(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.
An application of a factor referred to in
paragraph (d)(6)(ii) of this section is
unreasonable if it is inconsistent with
the protections provided by the
individual limitations described in
paragraphs (d)(2) through (d)(4) 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
whose benefits are closer to the
guarantee-based limitation. Similarly, it
would constitute an unreasonable
application of the factors described in
paragraph (d)(6)(ii)(B)(1) of this section

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25565

(age and life expectancy of the
participant or beneficiary) if those
factors were used to justify a greater
suspension for older participants.
(iv) Special rule for identification of
categories or groups—(A) New postsuspension benefit formula. This
paragraph (d)(6)(iv) applies in the case
of a proposed suspension of benefits
under which an individual’s benefits
after suspension are calculated under a
new benefit formula (rather than by
reference to the individual’s benefits
before suspension). In this case, the
evaluation of whether the proposed
suspension is equitably distributed
across the participant and beneficiary
population is based on a comparison of
an individual’s pre-suspension benefit
to the individual’s post-suspension
benefit (determined without regard to
the application of the individual
limitations). Accordingly, all
individuals whose pre-suspension
benefits are determined under a uniform
pre-suspension benefit formula and
whose post-suspension benefits are
determined under a different uniform
post-suspension benefit formula are
treated as a single group.
(B) Blended pre-suspension benefit
formula. If a plan applies different presuspension benefit formulas with
respect to different plan years, then all
individuals to whom more than one
such formula applied may be treated as
having a uniform pre-suspension benefit
formula for purposes of paragraph
(d)(6)(iv)(A) of this section (even though
those individuals have different
proportions of their pre-suspension
benefits calculated under the different
benefit formulas).
(C) Changes in early retirement
factors. For purposes of paragraph
(d)(6)(iv)(A) of this section, two
individuals are not treated as having
different pre-suspension or postsuspension benefit formulas merely
because, as a result of the application of
a uniform set of early retirement factors,
their benefits differ because of
retirement at different ages.
(v) Examples. The following examples
illustrate the rules on equitable
distribution of a suspension of benefits
of 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).

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Example 1. (i) Facts. The plan sponsor
applies for approval of a suspension of
benefits on March 15, 2017. Under the plan
terms applicable prior to the suspension, one
group of participants benefitted only under
Benefit Formula A and the remaining
participants benefitted only under Benefit
Formula B. Each of these benefit formulas is
uniform. Under the suspension of benefits,
subject to the individual limitations on
benefit suspensions, benefits for all
participants are reduced so that a uniform
post-suspension benefit formula (Benefit
Formula C) applies to all participants.
(ii) Conclusion. Because the reduction in
benefits under the suspension formula is
different for participants who benefitted only
under Benefit Formula A than for
participants who benefitted only under
Benefit Formula B, the suspension of benefits
provides for different treatment for different
participants and beneficiaries (other than as
a result of application of the individual
limitations). In addition, the suspension of
benefits provides for consistent treatment of
participants within the following two
categories: (1) Participants who benefitted
only under Benefit Formula A; and (2)
participants who benefitted only under
Benefit Formula B. Therefore, pursuant to
paragraph (d)(6)(iv)(A) of this section, these
two categories of participants are each treated
as a single group for purposes of evaluating
whether the proposed suspension is
equitably distributed across the participant
and beneficiary population. In order to
demonstrate that the distribution of the
suspension satisfies the equitable
distribution requirement, the plan sponsor
must reasonably select and apply factors that
are the basis for the different treatment of
these two groups of participants.
Example 2. (i) Facts. The facts are the same
as in Example 1, except that the plan terms
applicable prior to the suspension did not
provide for different benefit formulas for
different groups of participants at any given
time. Instead, the plan terms provided that
different uniform benefit formulas applied
for service prior to January 1, 2000, and for
service on or after January 1, 2000.
(ii) Conclusion. The reduction in benefits
under the suspension formula is different for
participants who had service only prior to
January 1, 2000, participants who had service
only after January 1, 2000, and participants
who had service during both of those
periods. The suspension of benefits provides
for different treatment for different
participants and beneficiaries (other than as
a result of application of the individual
limitations). In addition, the suspension of
benefits provides for consistent treatment of
participants within the following three
categories of participants: (1) Participants
whose entire service was prior to January 1,
2000, (2) participants whose entire service
was on or after January 1, 2000, and (3)
participants who have some service before
January 1, 2000 and some service on or after
January 1, 2000. Therefore, pursuant to
paragraph (d)(6)(iv)(A) of this section, the
two categories of participants whose entire
service was either before or on or after
January 1, 2000 are each treated as a single
group for purposes of evaluating whether the

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proposed suspension is equitably distributed
across the participant and beneficiary
population. In addition, pursuant to
paragraph (d)(6)(iv)(B) of this section, the
category of participants with some service
before January 1, 2000 and some service on
or after January 1, 2000 is treated as a single
group for purposes of this evaluation. In
order to demonstrate that the distribution of
the suspension satisfies the equitable
distribution requirement, the plan sponsor
must reasonably select and apply factors that
are the basis for the different treatment of
these three categories of participants.
Example 3. (i) Facts. The plan sponsor
applies for approval of 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
the same percentage, and the suspension
application indicates the rationale for this
reduction.
(ii) Conclusion. The suspension of benefits
is equitably distributed across the participant
and beneficiary populations.
Example 4. (i) Facts. The plan sponsor
applies for approval of a suspension of
benefits. Under the suspension of benefits,
subject to the age-based 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 of section
432(e)(9)(D)(i) is reduced by the same
percentage, and the suspension application
indicates 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 5. (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 approval of 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 indicates 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

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the difference in treatment between the two
groups of participants is based on whether a
participant has received post-retirement
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 two
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 6. (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
approval of 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 of those
individuals. The suspension application
indicates 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 (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 7. (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 approval of 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 the plan’s generally applicable
adjustments for early retirement and form of
benefit apply). The suspension application
indicates 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 three groups of participants
(reducing the $60 benefit multiplier to $50
per year of service for two groups of
participants—those who had accrued all of
their benefits under the $60 multiplier and
those who had accrued some of their benefits
under the $60 multiplier—and not reducing

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benefits for the group of participants who
had accrued all of their benefits under the
$50 multiplier) is based on a reasonable
application of those factors.
Example 8. (i) Facts. The facts are the same
as in Example 7, 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 9. (i) Facts. The facts are the same
as in Example 8, 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.
(ii) Conclusion. The suspension of benefits
is equitably distributed across the participant
and beneficiary populations. This is because
the difference in treatment between 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 10. (i) Facts. The plan sponsor
applies for approval of a suspension of
benefits. Under the suspension of benefits,
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%. As indicated 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 between the different groups of

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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 11. (i) Facts. The plan sponsor
applies for approval of a suspension of
benefits. Under the suspension of benefits,
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 between the two groups of
participants.
Example 12. (i) Facts. The facts are the
same as in Example 11, 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 between the two groups of
participants.
Example 13. (i) Facts. The plan sponsor
applies for approval of a suspension of
benefits. Under the suspension of benefits,
subject to the individual limitations on
benefit suspensions, the monthly benefit of
all participants and beneficiaries is reduced
to 110% of the monthly benefit that is
guaranteed by PBGC under section 4022A of
ERISA. As indicated in the suspension
application, this is because the plan sponsor
is applying to 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 14. (i) Facts. The plan sponsor
applies for approval of 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
the same percentage, except that the
protection for benefits based on disability
goes beyond the required disability-based
limitations and also includes payments to a
beneficiary of a participant who had been
receiving benefits based on disability at the
time of death. The suspension application
indicates the rationale for this protection
from reduction.
(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).

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25567

Example 15. (i) Facts. The facts are the
same as in Example 3, except that the plan
does not provide for benefits based on
disability. Under the suspension of benefits,
less of a reduction is applied to a participant
who has become disabled within the
meaning of title II of the Social Security Act
than to otherwise similarly situated
participants and the suspension application
indicates the rationale for this reduction.
(ii) Conclusion. The suspension of benefits
is equitably distributed across the participant
and beneficiary populations because a
participant’s disability within the meaning of
title II of the Social Security Act is a factor
that can reasonably be taken into account in
designing a suspension of benefits and
applying less of a reduction to an individual
in this group is a reasonable application of
that factor.

(7) Effective date of suspension made
in combination with partition. In any
case in which a suspension of benefits
with respect to a plan is made in
combination with a partition of the
plan, the suspension of benefits may not
take effect prior to the effective date of
the partition. This requirement will not
be satisfied if the partition order under
section 4233 of ERISA has not been
provided to the Secretary of the
Treasury by the last day of the 225-day
period described in paragraph (g)(3)(i) of
this section. For purposes of the
preceding sentence, a conditional
approval by PBGC (within the meaning
of 29 CFR 4233.12(c)) of a partition
application that is conditioned only on
the Secretary’s issuing a final
authorization to suspend is treated as a
partition order.
(8) Additional rules for plans
described in section 432(e)(9)(D)(vii).
[Reserved].
(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
with respect to the plan 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 of 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

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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 by the first day of the
plan year for which the benefit
improvement takes effect, unless—
(A) The present value of the total
liabilities for a benefit improvement for
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—(1) Actuarial
assumptions and methods. 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. The actuarial
assumptions and methods used for the
calculation for present values and the
actuarial projections that are required
under this paragraph (e)(2) must each be
reasonable, and the combination of the
actuarial assumptions and methods
must be reasonable, taking into account
the experience of the plan and
reasonable expectations.
(2) Increase in future accrual rate. In
the case of a benefit improvement that
is an increase in the rate of future
accrual, the present value determined
under paragraph (e)(2)(i)(A) of this
section must take into account the
increase in accruals for participants and
beneficiaries not yet in pay status for all
future years.
(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

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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 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
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

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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. No suspension of benefits may
be made pursuant to this section unless
notice of the proposed suspension has
been given by the plan sponsor to—
(i) All participants, beneficiaries of
deceased participants, and alternate
payees under the plan (regardless of
whether their benefits are proposed to
be suspended), except those who cannot
be contacted by reasonable efforts;
(ii) Each employer who has an
obligation to contribute (within the
meaning of section 4212(a) of ERISA)
under the plan; and
(iii) Each employee organization
which, for purposes of collective
bargaining, represents plan participants
employed by an employer described in
paragraph (f)(1)(ii) of this section.
(2) Content of notice—(i) In general.
The notice described under paragraph
(f)(1) of this section must contain—
(A) Sufficient information to enable a
participant or beneficiary to understand
the effect of any suspension of benefits,
including an individualized estimate
(on an annual or monthly basis) of the
effect on that participant or beneficiary;
(B) A description of the factors
considered by the plan sponsor in
designing the benefit suspension;
(C) A statement that the application
for approval of any suspension of
benefits will be available on the Web
site of the Department of the Treasury
and that comments on the application
will be accepted;
(D) Information as to the rights and
remedies of plan participants and
beneficiaries;
(E) If applicable, a statement
describing the appointment of a retiree
representative, the date of appointment
of the representative, the role and
responsibilities of the retiree
representative, identifying information
about the retiree representative
(including whether the representative is
a plan trustee), and how to contact the
retiree representative; and
(F) Information on how to contact the
Department of the Treasury for further
information and assistance where
appropriate.
(ii) Description of suspension of
benefits. The notice described under
paragraph (f)(1) of this section will not
satisfy the requirements of paragraph

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(f)(2)(i) of this section unless it includes
the following—
(A) To the extent that it is not possible
to provide an individualized estimate
on an annual or monthly basis of the
quantitative effect of the suspension on
a participant or beneficiary, such as in
the case of a suspension that affects the
payment of any future cost-of-living
adjustment, that effect may be reflected
in a narrative description;
(B) A statement that the plan sponsor
has determined that the plan will
become insolvent unless the proposed
suspension takes effect, and the year in
which insolvency is projected to occur
without a suspension of benefits;
(C) 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 upon
insolvency;
(D) A description of the proposed
suspension and its effect, including a
description of the different categories or
groups affected by the suspension, how
those categories or groups are defined,
and the formula that is used to calculate
the amount of the proposed suspension
for individuals in each category or
group;
(E) A description of the effect of the
proposed suspension on the plan’s
projected insolvency;
(F) A description of whether the
suspension will remain in effect
indefinitely, or the date the suspension
expires if it expires by its own terms;
and
(G) A statement describing the right to
vote on the suspension application.
(iii) Readability requirement. A notice
given under paragraph (f)(1) of this
section must be written in a manner so
as to be understood by the average plan
participant.
(iv) Model notice. The Secretary of the
Treasury will provide a model notice.
The use of the model notice will satisfy
the content and readability
requirements of this paragraph (f)(2)
with respect to the language provided in
the model.
(3) Form and manner—(i) Timing—
(A) In general. A notice under paragraph
(f)(1) of this section must be given no
earlier than four business days before
the date on which an application is
submitted and no later than two
business days after the Secretary of the
Treasury notifies the plan sponsor that
it has submitted a complete application,
as described in paragraph (g)(1)(ii) of
this section.
(B) Timing for lost participants. If
additional individuals who are entitled
to notice are located after the time
period in paragraph (f)(3)(i)(A) of this

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section has elapsed, then the plan
sponsor must give notice to these
individuals as soon as practicable
thereafter.
(ii) Method of delivery of notice—(A)
Written or electronic delivery. A notice
given under paragraph (f)(1) of this
section may be provided in writing. It
may also be provided in electronic form
to the extent that the form is reasonably
accessible to persons to whom the
notice is required to be provided.
Permissible electronic methods include
those permitted under regulations of the
Department of Labor at 29 CFR
2520.104b–1(c) and those described at
§ 54.4980F–1, Q&A–13(c) of the Excise
Tax Regulations.
(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.
A notice given under paragraph (f)(1) of
this section is permitted to include
information in addition to the
information that is required under
paragraph (f)(2) of this section,
including, if applicable, information
relating to an application for partition
under section 4233 of ERISA (such as
the model notice at Appendix A of 29
CFR part 4233), provided that the
requirements of paragraph (f)(3)(iv) of
this section are satisfied.
(iv) No false or misleading
information. A notice given under
paragraph (f)(1) of this section may not
include false or misleading information
(or omit information in a manner that
causes the information provided to be
misleading).
(4) Other notice requirement. Any
notice given under paragraph (f)(1) of
this section satisfies the requirement for
notice of a significant reduction in
benefits described in section 4980F that
would otherwise be required as a result
of that suspension of benefits. To the
extent that there are other reductions
that accompany a suspension of
benefits, such as a reduction in the
future accrual rate described in section
4980F for active participants or a
reduction in adjustable benefits under
section 432(e)(8), notice that satisfies
the requirements (including the
applicable timing requirements) of
section 4980F or section 432(e)(8), as
applicable, must be provided.
(5) Examples. The following examples
illustrate the requirement in paragraph
(f)(1)(i) of this section to give notice to
all participants, beneficiaries of
deceased participants, and alternate
payees, except those who cannot be
contacted by reasonable efforts.
Example 1. (i) Facts. A plan sponsor
distributes notice of a proposed suspension

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25569

of benefits to plan participants, beneficiaries
of deceased participants, and alternate
payees by mailing the notice to their last
known mailing addresses, using the same
information that it used to send the most
recent annual funding notice. Of 5,000 such
notices, 300 were returned as undeliverable.
The plan sponsor takes no additional steps to
contact the individuals for whom the notice
was returned as undeliverable.
(ii) Conclusion. The plan sponsor did not
make any effort beyond the initial mailing to
locate the 300 individuals for whom the
notice was returned as undeliverable.
Therefore, the plan sponsor did not satisfy
the requirement to provide notice to all
participants, beneficiaries of deceased
participants, and alternate payees under the
plan (regardless of whether their benefits are
proposed to be suspended), except those who
cannot be contacted by reasonable efforts.
Example 2.— (i) Facts. The facts are the
same as Example 1, but the plan sponsor
contacts the bargaining parties for the plan
and the plan administrators of any other
employee benefit plans that the plan sponsor
reasonably believes may have information
useful for locating the missing individuals,
and the plan sponsor requests contact
information for the missing individuals. The
plan sponsor then uses an Internet search
tool, a credit reporting agency, and a
commercial locator service to search for
individuals for whom it was not able to
obtain updated information from bargaining
parties. Through these efforts, the plan
sponsor locates the updated addresses of 250
of the 300 individuals whom it previously
failed to contact. The plan sponsor mails
notices to those individuals within one week
of locating them.
(ii) Conclusion. By using effective search
methods to find the previously missing
individuals and promptly mailing the notice
of suspension to them, the plan sponsor has
satisfied the requirement to provide notice to
all participants, beneficiaries of deceased
participants, and alternate payees under the
plan (regardless of whether their benefits are
proposed to be suspended), except those who
cannot be contacted by reasonable efforts.

(g) Approval or denial of an
application for suspension of benefits—
(1) Application—(i) In general. The plan
sponsor of a plan in critical and
declining status for a plan year that
seeks to suspend benefits must submit
an application for approval of the
proposed suspension of benefits to the
Secretary of the Treasury. The Secretary
of the Treasury, in consultation with
PBGC and the Secretary of Labor, will
approve a complete application
described in paragraph (g)(1)(ii) of this
section upon finding that—
(A) The plan is eligible for the
proposed suspension described in the
application;
(B) The plan actuary and plan sponsor
satisfy the requirements of section
432(e)(9)(C) in accordance with the
rules of paragraph (c) of this section;
(C) The design of the proposed
suspension described in the application

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satisfies the criteria of section
432(e)(9)(D) in accordance with the
rules of paragraphs (d) of this section;
and
(D) The plan sponsor satisfies the
requirements of section 432(e)(9)(E) and
(F) in accordance with the rules of
paragraphs (e) and (f) of this section.
(ii) Complete application. After
receiving a submission, the plan
sponsor will be notified within two
business days whether the submission
constitutes a complete application. A
complete application will be treated as
submitted on the date that it was
originally submitted to the Secretary of
the Treasury. If a submission is
incomplete, the notification will inform
the plan sponsor of the information that
is needed to complete the submission
and give the plan sponsor a reasonable
opportunity to submit a complete
application. In such a case, the complete
application will be treated as submitted
on the date on which the additional
information needed to complete the
application is submitted to the Secretary
of the Treasury.
(iii) Submission of application. An
application described in this paragraph
(g)(1) must be submitted electronically
in a searchable format.
(iv) Requirements for application.
Additional guidance that may be
necessary or appropriate with respect to
applications described in this paragraph
(g)(1), including procedures for
submitting applications and the
information required to be included in
a complete application, may be
published in the form of revenue
procedures, notices, or other guidance
in the Internal Revenue Bulletin.
(v) Requirement to provide adequate
time to process application—(A)
General rule. An application for
suspension that is not submitted in
combination with an application to
PBGC for a plan partition under section
4233 of ERISA generally will not be
accepted unless the proposed effective
date of the suspension is at least nine
months from the date on which the
application is submitted.
(B) Earlier effective date in
appropriate circumstances.
Nothwithstanding paragraph (g)(1)(v)(A)
of this section, in appropriate
circumstances the Secretary of the
Treasury, in consultation with PBGC
and the Secretary of Labor, may permit
a proposed suspension to have an
earlier effective date.
(vi) Plan sponsors that also apply for
partition. See part 4233 of the PBGC
regulations for a coordinated
application process that applies in the
case of a plan sponsor that is submitting
an application for suspension in

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combination with an application to
PBGC for a plan partition under section
4233 of ERISA.
(2) Solicitation of comments—(i) In
general. Not later than 30 days after
receipt of a complete application
described in paragraph (g)(1) of this
section—
(A) The application for approval of
the suspension of benefits will be
published on the Web site of the
Department of the Treasury; and
(B) The Secretary of the Treasury will
publish a notice in the Federal Register
soliciting comments from contributing
employers, employee organizations, and
participants and beneficiaries of the
plan for which an application was
made, and other interested parties.
(ii) Public comments. The notice
described in paragraph (g)(2)(i)(B) of
this section will generally request that
comments be submitted no later than 45
days after publication of that notice in
the Federal Register, but the notice may
specify a different deadline for
comments in appropriate circumstances.
Comments received in response to this
notice will be made publicly available.
(3) Special rules in the case of
revision to proposed suspension—(i)
Resubmission review available in
certain circumstances. The Secretary of
the Treasury (in consultation with PBGC
and the Secretary of Labor) has the
discretion, in appropriate
circumstances, to permit the plan
sponsor to submit a revision of a
proposed suspension that had been
withdrawn for resubmission review.
With respect to an application that is
accepted for resubmission review—
(A) The rules of paragraph (g)(1)(v)(B)
of this section will apply;
(B) The limitations of paragraph (d) of
this section with respect to the revised
proposed suspension may be applied
using the same actuarial data (including
the same fair market value of the plan
assets) as was used in the initial
application;
(C) The revision to the proposed
suspension will be published, and
comments solicited, in accordance with
paragraph (g)(2) of this section; and
(D) The plan sponsor must provide
notice of the revised proposed
suspension in accordance with the
requirements of paragraph (g)(3)(ii) of
this section.
(ii) Requirement to provide updated
notice to affected participants—(A)
General rule. Except as provided in
paragraph (g)(3)(ii)(B) of this section, a
plan sponsor that revises a proposed
suspension in accordance with this
paragraph (g)(3) must provide notice of
the suspension in accordance with the
rules of paragraph (f) of this section.

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(B) Treatment of participants who are
not affected by the revision. If the
revision to the proposed suspension
changes neither the amount of the
suspension as initially proposed nor the
effective date of the proposed
suspension for an affected individual,
then the Secretary of the Treasury (in
consultation with PBGC and the
Secretary of Labor) may permit the plan
sponsor to provide a simplified version
of the notice of the suspension to that
individual. For this purpose, the
effective date of a suspension is
determined without taking into account
the second sentence of paragraph
(a)(4)(iii)(C) of this section.
(4) Approval or denial—(i) Deemed
approval. A complete application
described in paragraph (g)(1)(ii) of this
section will be deemed approved
unless, within 225 days following the
date that the complete application is
submitted, the Secretary of the Treasury
notifies the plan sponsor that its
application does not satisfy one or more
of the requirements described in this
paragraph (g).
(ii) Notice of denial. If the Secretary
of the Treasury denies a plan sponsor’s
application, the notification of the
denial will detail the specific reasons
for the denial, including reference to the
specific requirement not satisfied.
(iii) Special rules for systemically
important plans. If the Secretary of the
Treasury approves a plan sponsor’s
application and the Secretary expects
that the plan is or may be a systemically
important plan (as defined in paragraph
(h)(5)(iv) of this section), the Secretary
will so notify the plan sponsor. In that
case, and in the event of a vote to reject
the suspension (as described in
paragraph (h)(4) of this section), the
plan sponsor may be required to supply
individual participant data and any
actuarial analyses that the Secretary
may request, in order to assist the
Secretary in determining whether to
permit the implementation of the
suspension that was approved by the
Secretary but rejected by a majority of
the eligible voters or the
implementation of a modification of that
suspension.
(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.
(5) Consideration of certain factors. In
evaluating whether the plan sponsor has
satisfied the requirement of paragraph
(c)(3)(i)(A) of this section, the Secretary
of the Treasury, in consultation with
PBGC and the Secretary of Labor, will
review the plan sponsor’s consideration

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of each of the factors under paragraph
(c)(3)(ii) of this section (and any other
factor that the plan sponsor considered).
(6) 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 PBGC and the Secretary of Labor,
that the determinations were clearly
erroneous.
(7) Plan sponsor certifications with
respect to plan amendments. The plan
sponsor will not satisfy the
requirements of paragraph (g)(1)(i)(B)
and (D) of this section 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).
(8) Special Master. The Secretary of
the Treasury may appoint a Special
Master for purposes of this section. If a
Special Master is appointed, the Special
Master will coordinate the
implementation of this section and the
review of applications for the
suspension of benefits and other
appropriate documents, and will
provide recommendations to the
Secretary of the Treasury with respect to
decisions required under this section.
(h) Participant vote on proposed
benefit reduction—(1) Requirement for
vote—(i) In general. If an application for
suspension is approved under
paragraph (g) of this section, then the
Secretary of the Treasury, in
consultation with PBGC and the
Secretary of Labor, will administer a
vote as described in section 432(e)(9)(H)
and this paragraph (h). A suspension of
benefits may not take effect before the
vote and may only take effect after a
final authorization to suspend benefits
under paragraph (h)(6) of this section.

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(ii) Communication by plan sponsor.
The plan sponsor must take reasonable
steps to inform eligible voters about the
proposed suspension. This includes all
eligible voters who may be contacted by
reasonable efforts in accordance with
paragraph (f)(1) of this section. Any
eligible voter whom the plan sponsor
has been able to locate through these
means (or who has otherwise been
located by the plan sponsor) must be—
(A) Included on the voting roster
described in paragraph (h)(3)(iii)(B) of
this section; and
(B) Sent a ballot described in
paragraph (h)(3) of this section.
(iii) Eligible voters—(A) General
definition. For purpose of this paragraph
(h), the term ‘‘eligible voters’’ means all
plan participants (that is, active plan
participants, deferred vested
participants, and retirees) and
beneficiaries of deceased participants.
(B) Voting roster. The voting roster
includes those eligible voters to whom
the notices described in paragraph (f) of
this section were sent. If there is a plan
participant or beneficiary who did not
receive a notice but who is subsequently
located by the plan sponsor, that
individual must be included on the
roster. Similarly, if an individual
becomes a plan participant after the date
the notices were sent, then the
individual must be included on the
roster. If a plan sponsor learns after the
date the notices described in paragraph
(f) of this section were sent that an
eligible voter has died, then that
deceased individual must not be
included on the roster (but if that
participant has a beneficiary entitled to
benefits under the plan, the beneficiary
must be added to the roster).
(2) Participant vote—(i) In general.
The participant vote described in
paragraph (h)(1)(i) of this section
requires completion of the following
steps—
(A) Distribution of the ballot package
described in paragraph (h)(2)(iii) of this
section to the eligible voters;
(B) Voting by eligible voters and
collection and tabulation of the votes, as
described in paragraph (h)(2)(iv) of this
section; and
(C) Determination of whether a
majority of the eligible voters has voted
to reject the suspension, as described in
paragraph (h)(2)(v) of this section.
(ii) Designation of service provider for
limited functions. The Secretary of the
Treasury is permitted to designate one
or more service providers to perform,
under the supervision of the Secretary,
any of the functions of the Secretary
described in paragraphs (h)(2)(i)(A) and
(B) of this section. If the Secretary
designates a service provider to perform

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these functions then the service
provider will provide the Secretary with
a written report of the results of the
vote, including (as applicable)—
(A) The number of ballot packages
distributed to eligible voters;
(B) The number of eligible voters to
whom ballot packages have not been
provided (because the individuals could
not be located);
(C) The number of eligible voters who
voted (specifying the number of
affirmative votes and the number of
negative votes cast); and
(D) Any other information that the
Secretary requires.
(iii) Distribution of the ballot package
to the eligible voters—(A) Ballot
package. The ballot package distributed
to each eligible voter consists of—
(1) A ballot, approved under
paragraph (h)(3)(iii) of this section,
which contains the items described in
section 432(e)(9)(H)(iii) and paragraph
(h)(3)(i) of this section; and
(2) A voter identification code
assigned to the eligible voter for use in
voting.
(B) Plan sponsor responsibilities—(1)
In general. This paragraph (h)(2)(iii)(B)
sets forth the responsibilities of the plan
sponsor with respect to the distribution
of the ballot package to the eligible
voters.
(2) Furnish information regarding
eligible voters. No later than 7 days
following the date the Secretary of the
Treasury has approved an application
for a suspension of benefits under
paragraph (g) of this section, the plan
sponsor must furnish the following—
(i) The voting roster described in
paragraph (h)(1)(iii)(B) of this section;
(ii) Plan information (such as
participant identification codes used by
the plan) to enable the Secretary of the
Treasury to verify the identity of each
eligible voter;
(iii) For each eligible voter on the
voting roster, the last known mailing
address (or, if the plan sponsor has been
unable to locate that individual using
the standards that apply for purposes of
paragraph (f)(1)(i) of this section, an
indication that the individual could not
be located through reasonable efforts);
(iv) Current electronic mailing
addresses for those eligible voters
identified in paragraph (h)(2)(iii)(B)(4)
of this section; and
(v) The individualized estimates
described in paragraph (f)(2)(i)(A) of this
section (or, if an individualized estimate
is no longer accurate for an eligible
voter, a corrected version of that
estimate).
(3) Communication with eligible
voters. In accordance with section
432(e)(9)(H)(iv) and paragraph (h)(1)(ii)

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of this section, the plan sponsor is
responsible for communicating with
eligible voters, which includes—
(i) Notifying the eligible voters
described in paragraph (h)(2)(iii)(B)(4)
of this section that a ballot package will
be mailed to them by first-class U.S.
mail; and
(ii) Making reasonable efforts (using
the standards that apply for purposes of
paragraph (f)(1)(i) of this section) as
necessary to locate eligible voters for
whom the plan sponsor has received
notification that the mailed ballot
packages are returned as undeliverable
(so that ballot packages can be sent to
those eligible voters).
(4) Eligible voters to receive electronic
notification. Those eligible voters whom
the plan sponsor must notify
electronically are—
(i) Eligible voters who previously
received the notice described in
paragraph (f) of this section in electronic
form (as permitted under paragraph
(f)(3)(ii) of this section), and
(ii) Any other eligible voters who
regularly receive plan-related
communications from the plan sponsor
in electronic form.
(5) Method of notifying certain eligible
voters. The notification described in
paragraph (h)(2)(iii)(B)(3)(i) of this
section for an eligible voter must be
made using the electronic form
normally used to send plan-related
communications to that voter (or the
form used to provide the notice in
paragraph (f) of this section, if different).
The plan sponsor must send this
notification promptly after being
informed of the ballot distribution date
(within the meaning of paragraph
(h)(2)(iii)(D) of this section) and the
notification must include the ballot
distribution date.
(6) Pay costs associated with
distribution. The plan sponsor is
responsible for paying all costs
associated with printing, assembling,
and distributing the ballot package,
including postage.
(C) Required method of distributing
ballot package. Ballot packages must be
distributed to eligible voters by firstclass U.S. mail. A supplemental copy of
the mailed ballot package may also be
sent by an electronic communication to
an eligible voter who has consented to
receive electronic communications.
(D) Timing. Ballot packages will be
distributed to eligible voters no later
than 30 days after the Secretary of the
Treasury has approved an application
for a suspension of benefits under
paragraph (g) of this section. The date
on which the ballot packages are mailed
to the eligible voters is referred to as the
ballot distribution date.

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(iv) Collection and tabulation of votes
cast by eligible voters—(A) Voting
period. The voting period is the period
during which a vote received from an
eligible voter will be counted. The
voting period begins on the ballot
distribution date. The voting period
generally remains open until the 30th
day following the date the Secretary of
the Treasury has approved an
application for a suspension of benefits
under paragraph (g) of this section.
However, the voting period will not
close earlier than 21 days after the ballot
distribution date. In addition, the
Secretary (in consultation with PBGC
and the Secretary of Labor) may specify
a later date to end the voting period in
appropriate circumstances.
(B) Automated voting system must be
provided. An automated voting system
that meets the requirements of
paragraph (h)(2)(iv)(C) of this section
must be made available to voters for
casting their votes. In appropriate
circumstances, the Secretary may, in
consultation with PBGC and the
Secretary of Labor, allow voters to cast
votes by mail in lieu of using the
automated voting system.
(C) Automated voting system. An
automated voting system meets the
requirements of this paragraph
(h)(2)(iv)(C) only if the system—
(1) Collects votes cast by eligible
voters both electronically (through a
Web site) and telephonically (through a
toll-free number allowing voters to cast
their votes using both a touch-tone
voting system and an interactive voice
response system); and
(2) Accepts only votes cast during the
voting period by an eligible voter who
provides the eligible voter’s
identification code described in
paragraph (h)(2)(iii)(A)(2) of this
section.
(D) Policies and procedures. The
Secretary of the Treasury (in
consultation with PBGC and the
Secretary of Labor) may establish such
policies and procedures as may be
necessary to facilitate the administration
of the vote under this paragraph (h)(2).
These policies and procedures may
include, but are not limited to,
establishing a process for an eligible
voter to challenge the vote.
(v) Determination of whether a
majority of the eligible voters has voted
to reject the suspension. Within 7
calendar days after the end of the voting
period, the Secretary of the Treasury (in
consultation with PBGC and the
Secretary of Labor) will—
(A) Certify that a majority of all
eligible voters has voted to reject the
suspension that was approved under
paragraph (g) of this section, or

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(B) Issue a final authorization to
suspend as described in paragraph (h)(6)
of this section.
(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 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
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
of the 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 described in paragraph
(f)(2)(i)(A) of this section (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—(A) Readability
requirement. A ballot provided under
section 432(e)(9)(H)(iii), in accordance
with the rules of paragraph (h)(3)(i) of
this section, must be written in a
manner that is readily understandable
by the average plan participant.
(B) No false or misleading
information. A ballot provided under
section 432(e)(9)(H)(iii), in accordance
with the rules of paragraph (h)(3)(i) of
this section, may not include false or
misleading information (or omit
information in a manner that causes the
information provided to be misleading).
(iii) Ballot must be approved. Any
ballot provided under section
432(e)(9)(H)(iii), in accordance with the
rules of paragraph (h)(3)(i) of this
section, must be approved by the
Secretary of the Treasury, in
consultation with PBGC and the
Secretary of Labor, before it is provided.
(iv) Statement in opposition to the
proposed suspension. The statement in
opposition to the proposed suspension
that is prepared from comments
received on the application, as required
under section 432(e)(9)(H)(iii)(II), will
be compiled by the Secretary of Labor
and will be written in accordance with
the rules of paragraph (h)(3)(ii) of this
section. If no comments in opposition
are received, the statement in
opposition to the proposed suspension
will include a statement indicating that
there were no such comments.
(v) Model ballot. Model language for
use in the ballot may be published in
the Internal Revenue Bulletin.
(4) Implementing suspension
following vote—(i) In general. Unless a
majority of all eligible voters vote to
reject the suspension that was approved
under paragraph (g) of this section, the
suspension will be permitted to take
effect. If a majority of all eligible voters
vote to reject the suspension that was
approved under paragraph (g) of this
section, a suspension of benefits will
not be permitted to take effect except as
provided under paragraph (h)(5)(iii) of
this section relating to the
implementation of a suspension for a
systemically important plan (as defined
in paragraph (h)(5)(iv) of this section).
(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

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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—(i)
In general. If a majority of all eligible
voters vote to reject the suspension that
was approved under paragraph (g) of
this section, the Secretary of the
Treasury will consult with PBGC and
the Secretary of Labor to determine if
the plan is a systemically important
plan. This determination will be made
no later than 14 days after the results of
the vote are certified.
(ii) Recommendations from
Participant and Plan Sponsor Advocate.
If the plan is determined to be a
systemically important plan, then, no
later than 44 days after the results of the
vote are certified, the Participant and
Plan Sponsor Advocate selected under
section 4004 of ERISA may submit
recommendations to the Secretary of the
Treasury with respect to the suspension
that was approved under paragraph (g)
of this section or any modifications to
the suspension.
(iii) Implementation of original or
modified suspension by systemically
important plans. If a plan is a
systemically important plan for which a
majority of all eligible voters vote to
reject the suspension that was approved
under paragraph (g) of this section, then
the Secretary of the Treasury must
determine whether to permit the
implementation of the suspension that
was approved under paragraph (g) of
this section or whether to permit the
implementation of a modification of that
suspension. Under any such
modification, the plan must be projected
to avoid insolvency in accordance with
section 432(e)(9)(D)(iv). No later than 60
days after the results of a vote to reject
a suspension are certified, the Secretary
of the Treasury will notify the plan
sponsor that the suspension or modified
suspension is permitted to be
implemented.
(iv) Systemically important plan
defined—(A) In general. For purposes of
this paragraph (h)(5), a systemically
important plan is a plan with respect to
which PBGC projects that the present
value of its financial assistance
payments will exceed $1.0 billion
(adjusted in accordance with paragraph
(h)(5)(iv)(B) of this section to the
calendar year in which the application
is submitted) if the suspension is not
implemented.
(B) Indexing. For calendar years
beginning after 2015, the dollar amount
specified in paragraph (h)(5)(iv)(A) of
this section will be replaced with an
amount equal to the product of the
dollar amount and a fraction, the

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numerator of which is the contribution
and benefit base (determined under
section 230 of the Social Security Act)
for the preceding calendar year and the
denominator of which is the
contribution and benefit base for
calendar year 2014. If the amount
otherwise determined under this
paragraph (h)(5)(iv)(B) is not a multiple
of $1.0 million, the amount will be
rounded to the next lowest multiple of
$1.0 million.
(6) Final authorization to suspend—(i)
In general. In any case in which a
suspension is permitted to take effect
following a vote pursuant to section
432(e)(9)(H)(ii) and paragraph (h)(4) of
this section, the Secretary of the
Treasury, in consultation with PBGC
and the Secretary of Labor, will issue a
final authorization to suspend with
respect to the suspension not later than
seven days after the vote.
(ii) Systemically important plans. In
any case in which a suspension is
permitted to take effect following a
determination under paragraph (h)(5) of
this section that the plan is a
systemically important plan, the
Secretary of the Treasury, in
consultation with PBGC and the
Secretary of Labor, will issue a final
authorization to suspend, at a time
sufficient to allow the implementation
of the suspension prior to the end of the
90-day period beginning on the date the
results of the vote are certified.
(iii) Plan partitions. Notwithstanding
any other provision of this section, in
any case in which a suspension of
benefits with respect to a plan is made
in combination with a partition of the
plan, the suspension of benefits is not
permitted to take effect prior to the
effective date of the partition.
(i) [Reserved].
(j) Effective/applicability date. This
section applies with respect to
suspensions for which the approval or
denial is issued on or after April 26,
2016 and, in the case of a systemically
important plan, any modification
described in paragraph (h)(5)(iii) of this
section that is implemented on or after
April 26, 2016.
Section 1.432(e)(9)–1T

[Removed]

Par. 3. Section 1.432(e)(9)–1T is
removed.

■

John Dalrymple,
Deputy Commissioner for Services and
Enforcement.
Approved: April 21, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2016–09888 Filed 4–26–16; 4:15 pm]
BILLING CODE 4830–01–P

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