Reg-151135-07

Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Proposed Rules
1,450,000 pigs, 14,000,000 turkeys, and
72,000,000 chickens.
*
*
*
*
*
§ 516.21

[Amended]

3. Amend § 516.21 by removing
paragraph (c).
Dated: January 29, 2008.
Jeffrey Shuren,
Associate Commissioner for Policy.
[FR Doc. E8–5385 Filed 3–17–08; 8:45 am]
BILLING CODE 4160–01–S

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG–149856–03]
RIN 1545–BD01

Dependent Child of Divorced or
Separated Parents or Parents Who
Live Apart; Hearing
Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of public hearing on
proposed rulemaking.
AGENCY:

This document contains a
notice of public hearing on proposed
regulations relating to a claim that a
child is a dependent by parents who are
divorced, legally separated under a
decree of separate maintenance,
agreement, or who live apart at all times
during the last 6 months of the calendar
year.
DATES: The public hearing is being held
on April 3, 2008, at 10 a.m. The IRS
must receive outlines of the topics to be
discussed at the hearing by March 26,
2008.
SUMMARY:

The public hearing is being
held in Room 2615, Internal Revenue
Building, 1111 Constitution Avenue,
NW., Washington, DC.
Send submissions to: CC:PA:LPD:PR
(REG–149856–03), Room 5203, Internal
Revenue Service, POB 7604, Ben
Franklin Station, Washington, DC
20044. Submissions may be hand
delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–149856–03),
Couriers Desk, Internal Revenue
Service, 1111 Constitution Avenue,
NW., Washington, DC or sent
electronically, via the IRS internet site
via the Federal eRulemaking Portal at
http://www.regulations.gov (IRS–REG–
149856–03).
FOR FURTHER INFORMATION CONTACT:
Concerning the regulations, Victoria
Driscoll (202) 622–4920; concerning

rwilkins on PROD1PC63 with PROPOSALS

ADDRESSES:

VerDate Aug<31>2005

16:08 Mar 17, 2008

Jkt 214001

submissions of comments, the hearing,
and/or to be placed on the building
access list to attend the hearing, Regina
Johnson (202) 622–7180 (not toll free
numbers).
SUPPLEMENTARY INFORMATION: The
subject of the public hearing is the
notice of proposed regulations (REG–
149856–03) that was published in the
Federal Register on Wednesday, May 2,
2007 (72 FR 24192).
The rules of 26 CFR 601.601(a)(3)
apply to the hearing. Persons who wish
to present oral comments at the hearing
that submitted written comments by
July 31, 2007, must submit an outline of
the topics to be discussed and the
amount of time to be devoted to each
topic (signed original and eight (8)
copies).
A period of 10 minutes is allotted to
each person for presenting oral
comments.
After the deadline for receiving
outlines has passed, the IRS will
prepare an agenda containing the
schedule of speakers. Copies of the
agenda will be made available, free of
charge, at the hearing.
Because of access restrictions, the IRS
will not admit visitors beyond the
immediate entrance area more than 30
minutes before the hearing starts. For
information about having your name
placed on the building access list to
attend the hearing, see the FOR FURTHER
INFORMATION CONTACT section of this
document.
LaNita Van Dyke,
Chief, Publications and Regulations Branch,
Associate Chief Counsel, Legal Processing
Division (Procedures and Administration).
[FR Doc. E8–5451 Filed 3–17–08; 8:45 am]

14417

published in the Federal Register on
Friday, March 7, 2008 (73 FR 12313)
providing guidance under Internal
Revenue Code section 664 on the tax
effect of unrelated business taxable
income (UBTI) on charitable remainder
trusts.
FOR FURTHER INFORMATION CONTACT:
Cynthia Morton at (202) 622–3060 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The correction notice that is the
subject of this document is under
section 664 of the Internal Revenue
Code.
Need for Correction
As published, a notice of proposed
rulemaking (REG–127391–07) contains
errors that may prove to be misleading
and are in need of clarification.
Correction of Publication
Accordingly, the publication of a
notice of proposed rulemaking (REG–
127391–07), which was the subject of
FR Doc. E8–4576, is corrected as
follows:
1. On page 12314, column 3, in the
preamble, under the paragraph heading
‘‘Comments and Public Hearing’’, line 2
of the second paragraph, the language
‘‘for April 11, 2007, at 10 a.m., in the
IRS’’ is corrected to read ‘‘for April 11,
2008, at 10 a.m., in the IRS’’.
2. On page 12314, column 3, in the
preamble, under the paragraph heading
‘‘Comments and Public Hearing’’, line 8
of the third paragraph, the language
‘‘and eight (8) copies) by March 28,
2007.’’ is corrected to read ‘‘and eight
(8) copies) by March 28, 2008.’’.

BILLING CODE 4830–01–P

DEPARTMENT OF THE TREASURY
Internal Revenue Service

LaNita Van Dyke,
Chief, Publications and Regulations Branch,
Legal Processing Division, Associate Chief
Counsel (Procedure and Administration).
[FR Doc. E8–5336 Filed 3–17–08; 8:45 am]
BILLING CODE 4830–01–P

26 CFR Part 1
[REG–127391–07]

DEPARTMENT OF THE TREASURY

RIN 1545–BH02

Guidance Under Section 664
Regarding the Effect of Unrelated
Business Taxable Income on
Charitable Remainder Trusts;
Correction
Internal Revenue Service (IRS),
Treasury.
ACTION: Correction to a notice of
proposed rulemaking.
AGENCY:

This document contains
corrections to a notice of proposed
rulemaking (REG–127391–07) that was

SUMMARY:

PO 00000

Frm 00018

Fmt 4702

Sfmt 4702

Internal Revenue Service
26 CFR Part 1
[REG–151135–07]
RIN 1545–BH39

Multiemployer Plan Funding Guidance
Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking.
AGENCY:

This document contains
proposed regulations under section 432

SUMMARY:

E:\FR\FM\18MRP1.SGM

18MRP1

14418

Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Proposed Rules

rwilkins on PROD1PC63 with PROPOSALS

of the Internal Revenue Code (Code).
These proposed regulations provide
additional rules for certain
multiemployer defined benefit plans
that are in effect on July 16, 2006. These
proposed regulations affect sponsors
and administrators of, and participants
in multiemployer plans that are in
either endangered or critical status.
These regulations are necessary to
implement the new rules set forth in
section 432 that are effective for plan
years beginning after 2007. The
proposed regulations reflect changes
made by the Pension Protection Act of
2006.
DATES: Written or electronic comments
and requests for public hearing must be
received by June 16, 2008.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–151135–07), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be handdelivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–151135–07),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue,
NW., Washington, DC 20224, or sent
electronically via the Federal
eRulemaking Portal at
www.regulations.gov (IRS REG–151135–
07).
FOR FURTHER INFORMATION CONTACT:
Concerning the regulations, Bruce
Perlin, (202) 622–6090; concerning
submissions and requests for a public
hearing,
[email protected] or
at (202) 622–7180 (not toll-free
numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information
contained in this notice of proposed
rulemaking have been submitted to the
Office of Management and Budget for
review in accordance with the
Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d). Comments on the
collection of information should be sent
to the Office of Management and
Budget, Attn: Desk Officer for the
Department of the Treasury, Office of
Information and Regulatory Affairs,
Washington, DC 20503, with copies to
the Internal Revenue Service, Attn: IRS
Reports Clearance Officer,
SE:CAR:MP:T:T:SP, Washington, DC
20224. Comments on the collection of
information should be received by May
19, 2008. Comments are specifically
requested concerning:
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the

VerDate Aug<31>2005

16:08 Mar 17, 2008

Jkt 214001

Internal Revenue Service, including
whether the information will have
practical utility;
The accuracy of the estimated burden
associated with the collection of
information;
How the quality, utility, and clarity of
the information to be collected may be
enhanced;
How the burden of complying with
the collection of information may be
minimized, including through the
application of automated collection
techniques or other forms of information
technology; and
Estimates of capital or start-up costs
and costs of operation, maintenance,
and purchase of service to provide
information.
The collection of information in this
regulation is in § 1.432(b)–1(d) and (e).
This information is required in order for
a qualified multiemployer defined
benefit plan’s enrolled actuary to
provide a timely certification of the
plan’s funding status. In addition, if it
is certified that a plan is or will be in
critical or endangered status, the plan
sponsor is required to notify the
Department of Labor, the Pension
Benefit Guaranty Corporation, the
bargaining parties, participants, and
beneficiaries of the status designation.
For plans in critical status, the plan
sponsor is required to include in the
notice an explanation of the possibility
that adjustable benefits may be reduced
at a later date and that certain benefits
are restricted as of the date the notice is
sent. The annual certification by the
enrolled actuary for the plan will be
used to provide an accurate
determination and certification of the
plan’s funded status and to provide
notice to the required parties of the
status designation. The collection of
information is mandatory. The likely
respondents are multiemployer plan
sponsors and enrolled actuaries.
Estimated total annual reporting
burden: 1,200 hours.
Estimated average annual burden
hours per respondent: 0.75 hours.
Estimated number of respondents:
1,600.
Estimated annual frequency of
responses: Occasional.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a valid control
number assigned by the Office of
Management and Budget.
Books or records relating to a
collection of information must be
retained as long as their contents may
become material in the administration
of any internal revenue law. Generally,
tax returns and tax return information

PO 00000

Frm 00019

Fmt 4702

Sfmt 4702

are confidential, as required by 26
U.S.C. 6103.
Background
This document contains proposed
Income Tax Regulations (26 CFR part 1)
under section 432, as added to the
Internal Revenue Code by the Pension
Protection Act of 2006 (PPA 06), Public
Law 109–280, 120 Stat 780.
Section 412 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 multiemployer plans in
effect on July 16, 2006, that are in
endangered or critical status.1
Section 432 generally provides for a
determination by the enrolled actuary
for a multiemployer plan as to whether
the plan is in endangered status or in
critical status for a plan year. In the first
year that the actuary certifies that the
plan is in endangered status, section
432(a)(1) requires that the plan sponsor
adopt a funding improvement plan. The
funding improvement plan must meet
the requirements of section 432(c) and
the plan must apply the rules of section
432(d) during the period that begins
when the plan is certified to be in
endangered status and ends when the
plan is no longer in that status. In the
first year that the actuary certifies that
the plan is in critical status, section 432
(a)(2) requires that the plan sponsor
adopt a rehabilitation plan. The
rehabilitation plan must meet the
requirements of section 432(e) and the
plan must apply the rules of section
432(f) during the period that begins
when the plan is certified to be in
critical status and ends when the plan
is no longer in that status. In addition,
section 432(f)(2) requires that the plan
suspend certain actions as described
more fully in this preamble.
Section 432(b)(3)(A) requires an
actuarial certification of whether or not
a multiemployer plan is in endangered
status, and whether or not a
multiemployer plan is or will be in
critical status, for each plan year. This
certification must be completed by the
1 Section 302 and section 304 of the Employee
Retirement Income Security Act of 1974, as
amended (ERISA) sets forth funding rules that are
parallel to those in section 412 and section 431 of
the Code. Section 305 of ERISA sets forth additional
rules for multiemployer plans that are parallel to
those in section 432 of the Code. Under section 101
of Reorganization Plan No. 4 of 1978 (43 FR 47713)
and section 302 of ERISA, the Secretary of the
Treasury has interpretive jurisdiction over the
subject matter addressed in these proposed
regulations for purposes of ERISA, as well as the
Code. Thus, these Treasury Department regulations
issued under section 432 of the Code apply as well
for purposes of ERISA section 305.

E:\FR\FM\18MRP1.SGM

18MRP1

rwilkins on PROD1PC63 with PROPOSALS

Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Proposed Rules
90th day of the plan year and must be
provided to the Secretary of the
Treasury and to the plan sponsor. If the
certification is with respect to a plan
year that is within the plan’s funding
improvement period or rehabilitation
period arising from a prior certification
of endangered or critical status, the
actuary must also certify whether or not
the plan is making scheduled progress
in meeting the requirements of its
funding improvement or rehabilitation
plan. Failure of the plan’s actuary to
certify the status of the plan is treated
as a failure to file the annual report
under section 502(c)(2) of the Employee
Retirement Income Security Act of 1974
(ERISA). Thus, a penalty of up to $1,100
per day applies.
Under section 432(b)(1), a
multiemployer plan is in endangered
status if the plan is not in critical status
and, as of the beginning of the plan year,
(1) the plan’s funded percentage for the
plan year is less than 80 percent, or (2)
the plan has an accumulated funding
deficiency for the plan year or is
projected to have an accumulated
funding deficiency in any of the six
succeeding plan years (taking into
account amortization extensions under
section 431(d)). Under section 432(i), a
plan’s funded percentage is the
percentage determined by dividing the
value of the plan’s assets by the accrued
liability of the plan.
Under section 432(b)(2), a
multiemployer plan is in critical status
for a plan year if it meets any of four
specified tests. Under section
432(b)(2)(A), a plan is in critical status
if, as of the beginning of the plan year:
(1) The funded percentage of the plan is
less than 65 percent and (2) the sum of
(A) the market value of plan assets, plus
(B) the present value of reasonably
anticipated employer contributions for
the current plan year and each of the six
succeeding plan years is less than the
present value of all nonforfeitable
benefits projected to be payable under
the plan during the current plan year
and each of the six succeeding plan
years (plus administrative expenses).
For this purpose, employer
contributions are determined assuming
that the terms of all collective
bargaining agreements pursuant to
which the plan is maintained for the
current plan year continue in effect for
succeeding plan years.
Under section 432(b)(2)(B), a plan is
in critical status if the plan has an
accumulated funding deficiency for the
current plan year or is projected to have
an accumulated funding deficiency for
any of the three succeeding plan years.
For purposes of this test, the
determination of accumulated funding

VerDate Aug<31>2005

16:08 Mar 17, 2008

Jkt 214001

deficiency is made not taking into
account any amortization extension
under section 431(d). In addition, if a
plan has a funded percentage of 65
percent or less, the three-year period for
projecting whether the plan will have an
accumulated funding deficiency is
extended to four years.
Under section 432(b)(2)(C), a plan is
in critical status for the plan year if (1)
the plan’s normal cost for the current
plan year, plus interest for the current
plan year on the amount of unfunded
benefit liabilities under the plan as of
the last day of the preceding year,
exceeds the present value of the
reasonably anticipated employer and
employee contributions for the current
plan year, (2) the present value of
nonforfeitable benefits of inactive
participants is greater than the present
value of nonforfeitable benefits of active
participants, and (3) the plan has an
accumulated funding deficiency for the
current plan year, or is projected to have
an accumulated funding deficiency for
any of the four succeeding plan years
(not taking into account amortization
period extensions under section 431(d)).
Under section 432(b)(2)(D), a plan is
in critical status for a plan year if the
sum of (A) the market value of plan
assets, and (B) the present value of the
reasonably anticipated employer
contributions for the current plan year
and each of the four succeeding plan
years is less than the present value of all
benefits projected to be payable under
the plan during the current plan year
and each of the four succeeding plan
years (plus administrative expenses).
For this purpose, employer
contributions are determined assuming
that the terms of all collective
bargaining agreements pursuant to
which the plan is maintained for the
current plan year continue in effect for
succeeding plan years.
In making the determinations and
projections applicable under the
endangered and critical status rules, the
plan actuary must make projections for
the current and succeeding plan years of
the current value of the assets of the
plan and the present value of all
liabilities to participants and
beneficiaries under the plan for the
current plan year as of the beginning of
such year. The actuary’s projections
must be based on reasonable actuarial
estimates, assumptions, and methods
that offer the actuary’s best estimate of
anticipated experience under the plan.
An exception to this rule applies in the
case of projected industry activity. Any
projection of activity in the industry or
industries covered by the plan,
including future covered employment
and contribution levels, must be based

PO 00000

Frm 00020

Fmt 4702

Sfmt 4702

14419

on information provided by the plan
sponsor, and the plan sponsor must act
reasonably and in good faith. The
projected present value of liabilities as
of the beginning of the year must be
based on either the most recent actuarial
statement required with respect to the
most recently filed annual report or the
actuarial valuation for the preceding
plan year.
Under section 432(b)(3)(B)(ii), any
actuarial projection of plan assets must
assume (1) reasonably anticipated
employer contributions for the current
and succeeding plan years, assuming
that the terms of one or more collective
bargaining agreements pursuant to
which the plan is maintained for the
current plan year continue in effect for
the succeeding plan years, or (2) that
employer contributions for the most
recent plan year will continue
indefinitely, but only if the plan actuary
determines that there have been no
significant demographic changes that
would make continued application of
such terms unreasonable.
The first year that an actuary certifies
that a plan is in endangered or critical
status establishes a timetable for a
number of actions. Under section
432(b)(3)(D), within 30 days after the
date of certification, the plan sponsor
must notify the participants and
beneficiaries, the bargaining parties, the
PBGC and the Secretary of Labor of the
plan’s endangered or critical status. If it
is certified that a plan is or will be in
critical status, the plan sponsor must
include in the notice an explanation of
the possibility that (1) adjustable
benefits (as defined in section 432(e)(8))
may be reduced and (2) such reductions
may apply to participants and
beneficiaries whose benefit
commencement date is on or after the
date such notice is provided for the first
plan year in which the plan is in critical
status.
If a plan is certified to be in critical
status, the plan must take certain
actions after notifying the plan
participants of the critical status.
Specifically, section 432(f)(2) restricts
the payment of benefits that are in
excess of a single life annuity (plus any
social security supplement) effective on
the date the notice is sent. Section
432(f)(2)(B) provides that this restriction
does not apply to amounts that may be
immediately distributed without the
consent of the employee under section
411(a)(11) and to any makeup payment
in the case of a retroactive annuity
starting date or a similar payment of
benefits owed with respect to a prior
period. In addition, the plan sponsor
must refrain from making any payment
for the purchase of an irrevocable

E:\FR\FM\18MRP1.SGM

18MRP1

rwilkins on PROD1PC63 with PROPOSALS

14420

Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Proposed Rules

commitment from an insurer to pay
benefits.
Sections 432(c)(1) and 432(e)(1)
provide that in the first year that a plan
is certified to be in endangered or
critical status, the plan sponsor must
adopt a funding improvement plan (in
the case of a plan that is in endangered
status) or a rehabilitation plan (in the
case of a plan that is in critical status).
The deadline for adoption of the
funding improvement plan or
rehabilitation plan is 240 days after the
deadline for the certification.
Accordingly, if the actuarial
certification is made after the 90-day
deadline, the amount of time for
adopting the funding improvement plan
or rehabilitation plan is shortened.
Section 432(c)(3) defines a funding
improvement plan as a plan which
consists of the actions, including
options or a range of options, to be
proposed to the bargaining parties,
formulated to provide, based on
reasonably anticipated experience and
reasonable actuarial assumptions, for
the attainment by the plan of certain
requirements. Those requirements are
based on a statutorily specified
improvement in the plan’s funding
percentage from the percentage that
applied on the first day of the funding
improvement period. The first day of
the funding improvement period is
defined in section 432(c)(4) as the first
day of the first plan year beginning after
the earlier of (1) the second anniversary
of the date of the adoption of the
funding improvement plan or (2) the
expiration of the collective bargaining
agreements in effect on the due date for
the actuarial certification of endangered
status for the initial endangered year
and covering, as of such due date, at
least 75 percent of the active
participants in such multiemployer
plan.
Section 432(d)(1) sets forth rules that
apply after the certification of
endangered status and before the first
day of the funding improvement period.
After the adoption of the funding
improvement plan, section 432(d)(2)
prohibits any amendments that are
inconsistent with the funding
improvement plan. In addition, section
432(d)(2) provides special rules for
acceptance of collective bargaining
agreements and plan amendments that
increase benefits.
A rehabilitation plan is a plan which
consists of the actions, including
options or a range of options, to be
proposed to the bargaining parties,
formulated to provide, based on
reasonably anticipated experience and
reasonable actuarial assumptions, for
the attainment by the plan of certain

VerDate Aug<31>2005

16:08 Mar 17, 2008

Jkt 214001

requirements. Generally, the
rehabilitation plan should enable the
plan to emerge from critical status by
the end of a 10-year period that begins
after the earlier of (1) the second
anniversary of the date of the adoption
of the rehabilitation plan or (2) the
expiration of the collective bargaining
agreements in effect on the due date for
the actuarial certification of critical
status for the initial critical year and
covering, as of such due date, at least 75
percent of the active participants in
such multiemployer plan. For this
purpose a plan emerges from critical
status when the plan actuary certifies
that the plan is not projected to have an
accumulated funding deficiency for the
plan year or any of the nine succeeding
plan years, without regard to the use of
the shortfall method and taking into
account amortization period extensions
under section 431(d). As an alternative,
if the plan sponsor determines that,
based on reasonable actuarial
assumptions and upon exhaustion of all
reasonable measures, the plan cannot
reasonably be expected to emerge from
critical status by the end of the 10-year
period, the requirements for a
rehabilitation plan are that the plan
include reasonable measures to emerge
from critical status at a later time or to
forestall possible insolvency (within the
meaning of section 4245 of ERISA).
Section 432(e)(8) allows a
rehabilitation plan for a plan that is in
critical status to provide for a reduction
of certain ‘‘adjustable’’ benefits that
would otherwise be protected by section
411(d)(6). These adjustable benefits
include early retirement benefits and
retirement-type subsidies within the
meaning of section 411(d)(6)(B)(i).
Under section 432(e)(8)(A)(ii), no
reduction will apply to a participant
whose benefit commencement date is
before the date the notice under section
432(b)(3)(D) for the initial critical year is
provided. Under section 432(e)(8)(B),
except with respect to certain benefit
increases described in
432(e)(8)(A)(iv)(III), a plan is not
permitted to reduce the level of a
participant’s accrued benefit payable at
normal retirement age. Furthermore,
section 432(e)(8)(C) prohibits any
reduction until 30 days after plan
participants and beneficiaries,
employers and employee organizations
are notified of the reduction.
In years after the initial critical year
or initial endangered year, sections
432(c)(6) and 432(e)(3)(B) provide that
the plan sponsor must annually update
the funding improvement or
rehabilitation plan. This includes
updating the schedule of contribution

PO 00000

Frm 00021

Fmt 4702

Sfmt 4702

rates. Updates are required to be filed
with the plan’s annual report.
Section 432(f)(4) sets forth rules that
apply after the certification of critical
status and before the first day of the
rehabilitation period. After the adoption
of the rehabilitation plan, section
432(f)(1) prohibits any amendments that
are inconsistent with the rehabilitation
plan.
Section 432(h) provides rules for the
treatment of employees who participate
in the plan even though they are not
covered by a collective bargaining
agreement.
Section 432(i) provides a number of
definitions that apply for purposes of
section 432. For example, under section
432(i)(8), the actuary’s determination
with respect to a plan’s normal cost,
actuarial accrued liability, and
improvements in a plan’s funded
percentage must be based on the unit
credit funding method (whether or not
that method is used for the plan’s
actuarial valuation).
Section 432 is effective for plan years
beginning on or after January 1, 2008.
Section 212(e)(2) of PPA ’06 provides a
special rule permitting a plan to provide
the notice described in section
432(b)(3)(D) on an early basis.
Specifically, if the plan actuary certifies
that the plan is reasonably expected to
be in critical status for the first plan year
beginning after 2007, the plan is
permitted to provide the notice
described in section 432(b)(3)(D) at any
time between the enactment of PPA ’06
and the date the notice is otherwise
required to be provided.
Explanation of Provisions
Overview
These regulations provide guidance
with respect to certain of the provisions
of section 432. Specifically, these
regulations provide guidance regarding
the determination of when a plan is in
endangered status or critical status and
the associated notices. These regulations
do not provide guidance with respect to
all issues relating to a multiemployer
plan that is in endangered or critical
status. For example, no guidance is
provided on the parameters for the
adoption of a funding improvement
plan or rehabilitation plan. Guidance
with respect to additional issues will be
included in a second set of regulations
that are expected to be issued this year.
§ 1.432(a)–1
Section 432

General Rules Relating to

Section 1.432–1 provides general
rules relating to section 432, including
definitions of certain terms used for
purposes of section 432 and the special

E:\FR\FM\18MRP1.SGM

18MRP1

rwilkins on PROD1PC63 with PROPOSALS

Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Proposed Rules
rules that apply to participants in
multiemployer plans who are not
participating pursuant to a collective
bargaining agreement.
The regulations provide that effective
on the date that a notice of critical status
for the initial critical year is sent to the
plan participants, the plan must not pay
any benefit in excess of the monthly
amount paid under a single life annuity
(plus any social security supplement)
and is not permitted to purchase an
irrevocable commitment from an insurer
to pay benefits. The restriction does not
apply to the small-dollar cash-outs
allowed under section 411(a)(11) nor to
the make-up payments under a
retroactive annuity starting date.
The regulations provide that if the
notice described in section 432(b)(3)(D)
has been sent and the restrictions
provided under section 432(f)(2) have
been applied, and it is later determined
that the restrictions should not have
been applied, then the plan must correct
any benefit payments that were
restricted in error. The regulations
provide two examples of situations
requiring this correction, each of which
involves an actuary certifying that the
plan is reasonably expected to be in
critical status for the first plan year
beginning after 2007, followed by an
early notification of critical status that is
made to employees under the rules of
section 212(e)(2) of PPA ’06. In one
example of a plan taking actions that
require correction, the plan restricts
benefits before the first plan year
beginning after 2007 (the effective date
of section 432). In the second such
example, the plan is not in critical
status for the first plan year beginning
after 2007 (even though the enrolled
actuary for the plan had certified that it
is reasonably expected that the plan will
be in critical status with respect to that
year).
The regulations incorporate a number
of definitions listed in section 432(i)
along with other definitions that are
located in sections 432(c) and (e). The
regulations do not include the broad
provision under section 432(i)(8) to use
the unit credit funding method for
purposes of the plan’s ‘‘normal cost,
actuarial accrued liability, and
improvements in a plan’s funded
percentage.’’ Instead, consistent with
the intended scope of section 432(i)(8),
the regulations require the use of this
funding method solely for purposes of
determining a plan’s funded percentage
and the section 432(b)(2)(C)(i)
comparison of contributions with the
sum of the plan’s normal cost and
interest on the amount of unfunded
liability. Thus, the determination of
whether a plan is projected to have an

VerDate Aug<31>2005

16:08 Mar 17, 2008

Jkt 214001

accumulated funding deficiency in the
determination of a plan’s status under
section 432 is based on the plan’s actual
funding method, rather than the unit
credit funding method. The regulations
substitute the term ‘‘initial endangered
year’’ for the statutory term ‘‘initial
determination year.’’
In addition, the regulations provide
guidance for plans that change their
status in subsequent years. For example,
a plan that is in critical status may
emerge from that status and later reenter
critical status. In such a circumstance,
the year of reentry into critical status is
treated as the initial critical year.
Similarly, a plan that is in endangered
status may have a status change and at
a later date reenter endangered status. In
such a circumstance, the year of reentry
into endangered status is treated as the
initial endangered year.
§ 1.432(b)–1 Determination of Status
and Adoption of a Plan
The regulations provide rules for the
determination of whether a plan is in
endangered status or critical status
within the meaning of section 432(b)(1)
and (2). These rules reflect the different
ways a plan can be in endangered status
under section 432(b)(1)(A) or (B) and in
critical status under section
432(b)(2)(A), (B), (C), or (D). The
regulations also provide that a plan is in
critical status for a plan year if it was
in critical status in the immediately
preceding year and the plan does not
meet the emergence from critical status
rule of section 432(e)(4)(B). Thus, a plan
that was in critical status for the prior
year will remain in critical status if the
enrolled actuary for the plan certifies
that the plan is projected to have an
accumulated funding deficiency for the
plan year or any of the 9 succeeding
plan years, without regard to the use of
the shortfall funding method but taking
into account any extensions of the
amortization periods under section
431(d).
The regulations provide limited
guidance on the actuarial projections
that are used for purposes of the
certification of status by the enrolled
actuary for the plan. The projections
must generally be based on reasonable
actuarial assumptions and methods that,
as under section 431(c)(3), offer the
actuary’s best estimate of anticipated
experience under the plan. The actuarial
projection of future contributions and
assets must assume either that the terms
of the one or more collective bargaining
agreements pursuant to which the plan
is maintained for the current plan year
continue in effect for succeeding plan
years, or that the dollar amount of
employer contributions for the most

PO 00000

Frm 00022

Fmt 4702

Sfmt 4702

14421

recent plan year will continue
indefinitely. If the actuarial projections
assume the continued maintenance of
the collective bargaining agreements,
the plan sponsor must provide a
projection of activity in the industry,
including future covered employment,
to the plan actuary, and the actuary is
permitted to rely on those projections.
In making these projections, the plan
sponsor must act reasonably and in
good faith. The alternative assumption
that the dollar amount of contributions
remains unchanged into the future is
only available if the enrolled actuary for
the plan determines there have been no
significant demographic changes that
would make such assumption
unreasonable. In addition, the
regulations provide that the alternative
assumption is not available for purposes
of determining whether the plan is in
critical status under the tests in section
432(b)(2)(A) and (D).
The projected present value of
liabilities as of the beginning of such
year is determined based on the most
recent information reported on the most
recent of either the actuarial statement
required under section 103(d) of ERISA
that has been filed with respect to the
most recent year, or the actuarial
valuation for the preceding plan year.
The regulations provide that, for
purposes of section 432, if the plan
received an extension of any
amortization period under section
412(e), the extension is treated the same
as an extension under section 431(d).
Thus, such an extension is taken into
account in determining endangered
status under section 432(b)(1)(B) and
emergence from critical status under
section 432(e)(4)(B). In contrast, such an
extension is not taken into account in
determining whether a plan has or will
have an accumulated funding deficiency
for purposes of determining critical
status under section 432(b)(2)(B) and
(C).
The regulations describe the content
of the annual certification required
under section 432(b)(3) that must be
sent to the plan sponsor and the IRS.
The annual certification must be
provided regardless of whether the plan
is in endangered or critical status. If the
plan is certified to be in endangered or
critical status, then the certification
must identify the plan, the plan
sponsor, and the enrolled actuary who
signs the certification; provide contact
information for the plan sponsor and
actuary; state whether or not the plan is
in endangered or critical status for the
plan year; and, if the certification is for
a year other than the initial endangered
year or the initial critical year, whether
the plan is making the scheduled

E:\FR\FM\18MRP1.SGM

18MRP1

rwilkins on PROD1PC63 with PROPOSALS

14422

Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Proposed Rules

progress described in the plan’s funding
improvement plan or rehabilitation
plan. The regulations also provide an
IRS address to which the certification is
to be mailed.
The regulations also provide that the
content of the annual certification and
the IRS address to which it is mailed
may be added to or modified in
guidance of general applicability to be
published in the Internal Revenue
Bulletin. Such additional information
may include, for instance, which
endangered status or critical status
standard(s) applies to the plan;
supporting information for the
classification; a description of the
actuarial assumptions used in making
the certification; and a projection of the
plan’s funded percentage for future
years. The guidance may also require
additional supporting information for
certifications made prior to the issuance
of the guidance.
The regulations provide guidance on
the notice required under section
432(b)(3)(D).2 In particular the
regulations require that, in the case of a
plan that is in critical status and which
provides for benefits that would be
restricted under section 432(f)(2), the
notice for the initial critical year must
tell participants about the restriction. A
plan sponsor that sends the model
notice provided by the Secretary of
Labor pursuant to section
432(b)(3)(D)(iii) satisfies this
requirement.
If a section 432(b)(3)(D) notice for
such a plan was sent prior to the
deadline in that section and the notice
did not contain the disclosure regarding
the immediate restriction on benefits
under section 432(f)(2), then the
regulations provide that the notice does
not satisfy the requirements for notice
under section 432(b)(3)(D). Accordingly,
the restrictions under section 432(f)(2)
do not apply as a result of the issuance
of such a notice and the plan will not
be treated as having issued the notice
for purposes of the section
432(e)(8)(A)(ii) restriction on reducing
adjustable benefits for participants
whose benefit commencement dates are
prior to the issuance of that notice.
However, if additional notice that
includes all of the information required
under the regulations is provided prior
to the required date for notice for the
initial critical year under section
432(b)(3)(D) (that is, 30 days after the
certification for the plan year), then the
notice requirements of section
2 Under

section 432(b)(3)(D)(ii), the Secretary of
Labor is to prescribe a model notice that a
multiemployer plan may use to satisfy this notice
requirement.

VerDate Aug<31>2005

16:08 Mar 17, 2008

Jkt 214001

432(b)(3)(D) are satisfied as of the date
of the later notice. In such a case, if the
earlier notice contained the information
described in section 432(b)(3)(D)(ii),
then the date of that earlier notice will
apply for purposes of the section
432(e)(8)(A)(ii) restriction.
The regulations reflect the rules of
section 212(e)(2) of PPA under which a
plan sponsor is permitted to send an
early notice to plan participants. This
early notice, which applies solely to the
first plan year beginning after 2007, is
only available if the plan actuary
certifies to the plan sponsor that the
plan is reasonably expected to be in
critical status for that initial plan year.
This preliminary certification that the
plan is reasonably expected to be in
critical status is different from the
annual certification that the plan
actuary must make; accordingly, the
plan actuary must still certify whether
the plan is in critical or endangered
status (or in neither critical nor
endangered status) for that plan year by
the normal 90-day deadline for the
certification.
Proposed Legislation
As of the date of the issuance of these
proposed regulations, bills have been
introduced in the House of
Representatives and the Senate that
would exclude from the section
432(f)(2) limitation on accelerated
benefits a distribution with an annuity
starting date that is before the date that
the notice under section 432(b)(3)(D) is
provided.3 Section 1.432(a)–
1(a)(3)(iii)(C) has been reserved in order
to accommodate any enacted changes.
Effective/Applicability Dates
These regulations apply to plan years
ending after [INSERT DATE OF
PUBLICATION OF THESE
REGULATIONS IN THE Federal
Register], but only with respect to plan
years that begin on or after January 1,
2008. These regulations do not address
the sunset provision provided by PPA
06 section 221(c).
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a
significant regulatory action as defined
in Executive Order 12866. Therefore, a
regulatory assessment is not required. It
has also been determined that section
553(b) of the Administrative Procedure
Act (5 U.S.C. chapter 5) does not apply
to these regulations. It is hereby
3 See H.R. 3361(August 3, 2007) and S. 1974
(August 2, 2007) at sections 3(b)(1)(E) and
3(b)(2)(E)(ii). However, S. 1974, as amended and
passed by the Senate on December 19, 2007, did not
include this provision.

PO 00000

Frm 00023

Fmt 4702

Sfmt 4702

certified that the collection of
information imposed by these proposed
regulations will not have a significant
economic impact on a substantial
number of small entities. Accordingly, a
regulatory flexibility analysis is not
required. The estimated burden
imposed by the collection of
information contained in these
proposed regulations is 0.75 hours per
respondent. Moreover, most of this
burden is attributable to the requirement
for a qualified multiemployer defined
benefit plan’s enrolled actuary to
provide a timely certification of the
plan’s funding status. In addition, if a
plan is certified that it is or will be in
critical or endangered status, the plan
sponsor is required to notify the
Department of Labor, the Pension
Benefit Guaranty Corporation, the
bargaining parties, participants, and
beneficiaries of the status designation.
For plans in critical status, the plan
sponsor is required to include an
explanation of the possibility that
adjustable benefits may be reduced and
that certain benefits are restricted as of
the date the notice is sent. Pursuant to
section 7805(f) of the Internal Revenue
Code, this regulations has been
submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on its
impact on small business.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations,
consideration will be given to any
written (one signed and eight (8) copies)
or electronic comments that are
submitted timely to the IRS. The IRS
and the Treasury Department request
comments on the clarity of the proposed
rules and how they may be made easier
to understand. All comments will be
available for public inspection and
copying. A public hearing will be
scheduled if requested in writing by any
person who timely submits written
comments. If a public hearing is
scheduled, notice of the date, time, and
place of the public hearing will be
published in the Federal Register.
Drafting Information
The principal author of this regulation
is Bruce Perlin, Office of Division
Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities).
However, other personnel from the IRS
and the Treasury Department
participated in their development.
List of Subjects in 29 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.

E:\FR\FM\18MRP1.SGM

18MRP1

Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Proposed Rules
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
proposed to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *

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

rwilkins on PROD1PC63 with PROPOSALS

§ 1.432(a)–1 General rules relating to
section 432.

(a) In general—(1) Overview. This
section provides rules relating to
multiemployer plans (within the
meaning of section 414(f)) that are in
endangered status or critical status
under section 432. Section 432 and this
section only apply to multiemployer
plans that are in effect on July 16, 2006.
Paragraph (b) of this section sets forth
definitions of terms that apply for
purposes of section 432. Paragraph (c) of
this section sets forth special rules for
plans described in section 404(c) and for
the treatment of nonbargained
participation.
(2) Plans in endangered status—(i)
Plan sponsor must adopt funding
improvement plan. If a plan is in
endangered status, the plan sponsor
must adopt and implement a funding
improvement plan that satisfies the
requirements of section 432(c).
(ii) Restrictions applicable to plans in
endangered status. If a plan is in
endangered status, the plan and plan
sponsor must satisfy the requirements of
section 432(d)(1) during the funding
plan adoption period specified in
section 432(c)(8).
(iii) Restrictions applicable after the
adoption of funding improvement plan.
In the case of a plan that is in
endangered status after adoption of the
funding improvement plan, the plan
and the plan sponsor must satisfy the
requirements of section 432(d)(2) until
the end of the funding improvement
period.
(3) Plans in critical status—(i) Plan
sponsor must adopt rehabilitation plan.
If a plan is in critical status, the plan
sponsor must adopt and implement a
rehabilitation plan that satisfies the
requirements of section 432(e).
(ii) Restrictions applicable to plans in
critical status. If a plan is in critical
status, the plan and the plan sponsor
must satisfy the requirements of section
432(f)(4) during the rehabilitation plan
adoption period as defined in section
432(e)(5). The plan must also apply the
restrictions on single sum and other

VerDate Aug<31>2005

16:08 Mar 17, 2008

Jkt 214001

accelerated benefits set forth in
paragraph (a)(3)(iii) of this section.
(iii) Restrictions on single sums and
other accelerated benefits—(A) In
general. A plan in critical status is
required to provide that, effective on the
date the notice of certification of the
plan’s critical status for the initial
critical year under § 1.432(b)–1(e) is
sent, no payment in excess of the
monthly amount payable under a single
life annuity (plus any social security
supplements described in the last
sentence of section 411(a)(9)), and no
payment for the purchase of an
irrevocable commitment from an insurer
to pay benefits, may be made except as
provided in section 432(f)(2). A plan
amendment that provides for these
restrictions does not violate section
411(d)(6).
(B) Exceptions. Pursuant to section
432(f)(2)(B), the restrictions under this
paragraph (a)(3)(iii) do not apply to a
benefit which under section 411(a)(11)
may be immediately distributed without
the consent of the participant or to any
makeup payment in the case of a
retroactive annuity starting date or any
similar payment of benefits owed with
respect to a prior period.
(C) [Reserved.]
(D) Correction of erroneous
restrictions. If the notice described in
§ 1.432(b)–1(e) has been sent and the
restrictions provided under this
paragraph (a)(3)(iii) have been applied,
and it is later determined that the
restrictions should not have been
applied, then the plan must correct any
benefit payments that were restricted in
error. Thus, for example, if pursuant to
section 212(e)(2) of the Pension
Protection Act of 2006, Public Law 109–
280, 120 Stat. 780 the enrolled actuary
for the plan certified that it was
reasonably expected that the plan would
be in critical status with respect to the
first plan year beginning after 2007, and
the notice described in § 1.432(b)–
1(e)(3)(i) was sent, but the plan is not
later certified to be in critical status for
that plan year, then the plan must
correct any benefit payments that were
restricted after the notice was sent.
Similarly, if the enrolled actuary for the
plan certified that it was reasonably
expected that the plan would be in
critical status with respect to the first
plan year beginning after 2007, and the
notice described in § 1.432(b)–1(e)(3)(i)
was sent before the first day of that plan
year, the restriction on benefits under
section 432(f)(2) first applies beginning
on the first day of the first plan year
beginning after 2007. If the plan restricts
benefits before that date, then the plan
must correct any improperly restricted
benefits.

PO 00000

Frm 00024

Fmt 4702

Sfmt 4702

14423

(iv) Restrictions applicable after the
adoption of rehabilitation plan. In the
case of a plan that is in critical status
after the adoption of the rehabilitation
plan, the plan and the plan sponsor
must satisfy the requirements of section
432(f)(1) until the end of the
rehabilitation period.
(b) Definitions. The following
definitions apply for purposes of section
432 and the regulations:
(1) Accumulated funding deficiency.
The term accumulated funding
deficiency has the same meaning as the
term accumulated funding deficiency
under section 431(a).
(2) Active participant. The term active
participant means a participant who is
in covered service under the plan.
(3) Bargaining party. Except as
provided in paragraph (c)(1) of this
section, the term bargaining party means
an employer who has an obligation to
contribute under the plan and an
employee organization which, for
purposes of collective bargaining,
represents plan participants employed
by an employer which has an obligation
to contribute under the plan.
(4) Benefit commencement date. The
term benefit commencement date means
the annuity starting date (or in the case
of a retroactive annuity starting date, the
date on which benefit payments begin).
(5) Critical status. A multiemployer
plan is in critical status if the plan meets
one of the tests set forth in § 1.432(b)1(c).
(6) Endangered status. A plan is in
endangered status if the plan meets one
of the tests set forth in § 1.432(b)-1(b).
(7) Funded percentage. The term
funded percentage means a fraction
(expressed as a percentage) the
numerator of which is the actuarial
value of the plan’s assets as determined
under section 431(c)(2) and the
denominator of which is the accrued
liability of the plan, determined using
the actuarial assumptions described in
section 431(c)(3) and the unit credit
funding method.
(8) Funding improvement period for
endangered or seriously endangered
plans. The term funding improvement
period means the period that begins on
the first day of the first plan year
beginning after the earlier of the second
anniversary of the date of the adoption
of the funding improvement plan, or the
expiration of the collective bargaining
agreements that are in effect on the due
date for the actuarial certification of
endangered status for the initial
endangered year and which cover, as of
such due date, at least 75 percent of the
active participants in the plan. The
funding improvement period ends on
the last day of the 10th year (15 years

E:\FR\FM\18MRP1.SGM

18MRP1

rwilkins on PROD1PC63 with PROPOSALS

14424

Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Proposed Rules

for seriously endangered plans, except
as provided in section 432(c)(5)) after it
begins or, if earlier, the date of the
change in status described in section
432(c)(4)(C).
(9) Funding plan adoption period.
The term funding plan adoption period
means the period that begins on the date
of the actuarial certification for the
initial endangered year and ends on the
day before the first day of the funding
improvement period.
(10) Inactive participant. The term
inactive participant means —
(i) A participant who is not an active
participant, (ii) A beneficiary under the
plan, or
(iii) An alternate payee under the
plan.
(11) Initial critical year. The term
initial critical year means the first year
for which the enrolled actuary for the
plan has certified that the plan is or will
be in critical status. If a plan is in
critical status in one year, emerges from
critical status in a subsequent year and
then returns to critical status, the year
of reentry into critical status is treated
as the initial critical year with respect
to subsequent years.
(12) Initial endangered year. The term
initial endangered year means the first
year for which the enrolled actuary for
the plan has certified that the plan is in
endangered status. If a plan is in
endangered status in one year, changes
from endangered status in a subsequent
year and then returns to endangered
status, the year of reentry into
endangered status is treated as the
initial endangered year with respect to
subsequent years.
(13) Nonbargained participant. The
term nonbargained participant means a
participant in the plan whose
participation is other than pursuant to a
collective bargaining agreement within
the meaning of section 7701(a)(46). A
participant will not be treated as a
nonbargained participant merely
because the participant is no longer
covered by the collective bargaining
agreement solely as a result of
retirement or severance from
employment.
(14) Obligation to contribute. The
term obligation to contribute means an
obligation to contribute arising under
one or more collective bargaining (or
related) agreements or as a result of a
duty under applicable labormanagement relations law.
(15) Plan sponsor. Except as provided
in paragraph (c)(1) of this section, the
term plan sponsor means the
association, committee, joint board of
trustees, or other similar group of
representatives of the parties who
establish or maintain the plan.

VerDate Aug<31>2005

16:08 Mar 17, 2008

Jkt 214001

(16) Rehabilitation period. The term
rehabilitation period means the period
that begins on the first day of the first
plan year beginning after the earlier of
the second anniversary of the date of the
adoption of the rehabilitation plan, or
the expiration of the collective
bargaining agreements that are in effect
on the due date for the actuarial
certification of critical status for the
initial critical year and which cover, as
of such due date, at least 75 percent of
the active participants in the plan. The
rehabilitation period ends on the last
day of the 10th year after it begins or,
if earlier, the plan year preceding the
plan year in which the plan has
emerged from critical status as
described in section 432(e)(4)(B).
(17) Rehabilitation plan adoption
period. The term rehabilitation plan
adoption period means the period that
begins on the date of the actuarial
certification for the initial critical year
and ends on the day before the first day
of the rehabilitation period.
(18) Seriously endangered status. A
plan is in seriously endangered status if
the plan is in endangered status and is
described in both § 1.432(b)–1(b)(2) and
(3).
(c) Special rules—(1) Plan described
in section 404(c). In the case of a plan
described in section 404(c), or a
continuation of such a plan, the
association of employers that is the
employer settlor of the plan is treated as
a bargaining party and is treated as the
plan sponsor for purposes of section
432.
(2) Plans covering both bargained and
nonbargained participants. In the case
of an employer that contributes to a plan
with respect to both employees who are
covered by one or more collective
bargaining agreements and employees
who are nonbargained participants, if
the plan is in endangered status or
critical status, benefits of and
contributions for the nonbargained
participants (including surcharges on
those contributions) are determined as if
those nonbargained participants were
covered under the employer’s collective
bargaining agreement in effect when the
plan entered endangered or critical
status that is the first to expire.
(3) Plans covering nonbargained
participants only. In the case of an
employer that contributes to a
multiemployer plan only with respect to
employees who are not covered by a
collective bargaining agreement, section
432 and the regulations thereunder are
applied as if the employer were the
bargaining party, and its participation
agreement with the plan were a
collective bargaining agreement with a
term ending on the first day of the plan

PO 00000

Frm 00025

Fmt 4702

Sfmt 4702

year beginning after the employer is
provided the schedules described in
sections 432(c) and (e).
(d) Effective/applicability date. These
regulations apply to plan years ending
after March 18, 2008, but only with
respect to plan years that begin on or
after January 1, 2008.
Par. 3. Section 1.432(b)-1 is added to
read as follows:
§ 1.432(b)-1 Determination of status and
adoption of a plan.

(a) In general. This section provides
rules relating to multiemployer plans
(within the meaning of section 414(f))
that are in endangered status or critical
status under section 432. Section 432
and this section only apply to
multiemployer plans that are in effect
on July 16, 2006. Paragraph (b) of this
section sets forth the factors for
determining whether a plan is in
endangered status. Paragraph (c) of this
section sets forth the factors for
determining whether a plan is in critical
status. Paragraph (d) sets forth the
requirements for the annual certification
by the plan’s enrolled actuary.
Paragraph (e) of this section describes
the notice to employees that is required
for plans that are in endangered or
critical status.
(b) Determination of endangered
status—(1) In general. A plan is in
endangered status for a plan year if, as
determined by the enrolled actuary for
the plan, the plan is not in critical status
for the plan year and if, as of the
beginning of the plan year, the plan is
described either in paragraph (b)(2) of
this section or paragraph (b)(3) of this
section. The enrolled actuary’s
determination of whether a plan is in
endangered status is made under the
rules of paragraph (d)(5) of this section.
(2) Endangered status based on
funding percentage. A plan is described
in this paragraph (b)(2) for a plan year
if the plan’s funded percentage for such
plan year is less than 80 percent.
(3) Endangered status based on
projection of funding deficiency. A plan
is described in this paragraph (b)(3) for
a plan year if the plan has an
accumulated funding deficiency for
such plan year (or is projected to have
such an accumulated funding deficiency
for any of the 6 succeeding plan years),
taking into account any extension of
amortization periods under section
431(d).
(c) Critical Status—(1) In general. A
multiemployer plan is in critical status
for a plan year if, as determined by the
enrolled actuary for the plan, the plan
is described in one or more of
paragraphs (c)(2) through (c)(6) of this
section as of the beginning of the plan

E:\FR\FM\18MRP1.SGM

18MRP1

rwilkins on PROD1PC63 with PROPOSALS

Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Proposed Rules
year. The enrolled actuary’s
determination of critical status must be
made in accordance with the rules of
paragraph (d)(5) of this section.
Notwithstanding paragraph (d)(5)(iii) of
this section, for purposes of applying
the critical status tests described in
paragraphs (c)(2) and (c)(5) of this
section, the actuary must assume that
the terms of all collective bargaining
agreements pursuant to which the plan
is maintained for the current plan year
continue in effect for succeeding plan
years.
(2) Critical status based on 6-year
projection of benefit payments. A plan
is described in this paragraph (c)(2) if
the funded percentage of the plan is less
than 65 percent, and the present value
of all nonforfeitable benefits projected to
be payable under the plan during the
current plan year and each of the 6
succeeding plan years (plus
administrative expenses for such plan
years) is greater than the sum of—
(i) The fair market value of plan
assets, plus
(ii) The present value of the
reasonably anticipated employer
contributions for the current plan year
and the 6 succeeding plan years.
(3) Critical status based on short term
funding deficiency. A plan is described
in this paragraph (c)(3) if—
(i) The plan has an accumulated
funding deficiency for the current plan
year, not taking into account any
extension of amortization periods under
section 431(d), or
(ii) The plan is projected to have an
accumulated funding deficiency for any
of the 3 succeeding plan years (4
succeeding plan years if the funded
percentage of the plan is 65 percent or
less), not taking into account any
extension of amortization periods under
section 431(d).
(4) Critical status based on
contributions less than normal cost plus
interest. A plan is described in this
paragraph (c)(4) if—
(i) The present value of the reasonably
anticipated employer and employee
contributions for the current plan year
is less than the sum of
(A) The plan’s normal cost
(determined under the unit credit
funding method), and
(B) Interest (determined at the rate
used for determining costs under the
plan) on the excess if any of—
(1) The accrued liability of the plan
(determined using the actuarial
assumptions described in section
431(c)(3) and the unit credit funding
method) over
(2) The actuarial value of assets
determined under section 431(c)(2),

VerDate Aug<31>2005

16:08 Mar 17, 2008

Jkt 214001

(ii) The present value, as of the
beginning of the current plan year, of
nonforfeitable benefits of inactive
participants is greater than the present
value of nonforfeitable benefits of active
participants, and
(iii) The plan has an accumulated
funding deficiency for the current plan
year (or is projected to have such a
deficiency for any of the 4 succeeding
plan years), not taking into account any
extension of amortization periods under
section 431(d).
(5) Critical status based on 4-year
projection of benefit payments. A plan
is described in this paragraph (c)(5) if
the present value of all benefits
projected to be payable under the plan
during the current plan year or any of
the 4 succeeding plan years (plus
administrative expenses for such plan
years) is greater than the sum of—
(i) The fair market value of plan
assets, plus
(ii) The present value of the
reasonably anticipated employer
contributions for the current plan year
and each of the 4 succeeding plan years.
(6) Critical status based on failure to
meet emergence criteria. A plan is
described in this paragraph (c)(6) if—
(i) The plan was in critical status for
the immediately preceding plan year,
and
(ii) The enrolled actuary for the plan
has certified that the plan is projected
to have an accumulated funding
deficiency for the plan year or any of the
9 succeeding plan years, without regard
to the use of the shortfall funding
method but taking into account any
extensions of the amortization periods
under section 431(d).
(d) Annual certification by the plan’s
enrolled actuary—(1) In general. Not
later than the 90th day of each plan year
of a multiemployer plan, the enrolled
actuary for the plan must certify to the
Secretary of the Treasury and to the
plan sponsor—
(i) Whether or not the plan is in
endangered status for such plan year;
(ii) Whether or not the plan is or will
be in critical status for such plan year,
and
(iii) In the case of a plan which is in
a funding improvement or rehabilitation
period, whether or not the plan is
making the scheduled progress in
meeting the requirements of its funding
improvement or rehabilitation plan.
(2) Transmittal of certification—(i)
Transmittal to the plan sponsor. The
certification of plan status described in
paragraph (d)(1) must be submitted to
the plan sponsor at the address stated by
the plan sponsor on their Annual Report
(Form 5500) or such other address as the

PO 00000

Frm 00026

Fmt 4702

Sfmt 4702

14425

plan sponsor may designate in writing
for receipt of this certification.
(ii) Transmittal to the Secretary of the
Treasury. Except as provided in
guidance of general applicability to be
published in the Internal Revenue
Bulletin, the annual certification of plan
status described in paragraph (d)(1)
must be transmitted to the Secretary of
the Treasury by mailing the certification
to: Internal Revenue Service, Employee
Plans Compliance Unit, Group 7602
(SE:TEGE:EP), Room 1700—17th Floor,
230 S. Dearborn Street, Chicago, IL
60604.
(3) Content of annual certification—(i)
In general. The annual certification
must contain the information described
in this paragraph (d)(3). The Secretary
may add to or otherwise modify the
requirements in this paragraph (d)(3) in
guidance of general applicability to be
published in the Internal Revenue
Bulletin.
(ii) Plan identification. The annual
certification must include the name of
the plan; the plan number; the name,
address, and telephone number of the
plan sponsor; and the plan year for
which the certification is being made.
(iii) Enrolled actuary identification.
The annual certification must include
the name, address and telephone
number of the enrolled actuary signing
the certification; the actuary’s
enrollment identification number; the
actuary’s signature, and the date of the
signature.
(iv) Information on plan status. The
annual certification must state whether
the plan is in endangered status (which
includes seriously endangered status);
critical status, or neither endangered nor
critical status.
(v) Information on scheduled
progress. If the annual certification is
made with respect to a plan year that is
within the plan’s funding improvement
period or rehabilitation period arising
from a prior certification of endangered
or critical status, the actuary must also
certify whether or not the plan is
making scheduled progress in meeting
the requirements of its funding
improvement or rehabilitation plan.
(4) Penalty for failure to secure timely
actuarial certification. A failure of a
plan’s actuary to certify the plan’s status
under this paragraph (d) by the date
specified in paragraph (d)(1) of this
section is treated as a failure or refusal
by the plan administrator to file the
annual report required to be filed with
the Secretary of Labor under section
101(b)(4) of the Employee Retirement
Income Security Act of 1974.
(5) Actuarial projections of assets and
liabilities—(i) In general. In making the
determinations and projections under

E:\FR\FM\18MRP1.SGM

18MRP1

rwilkins on PROD1PC63 with PROPOSALS

14426

Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Proposed Rules

section 432(b) and this section, the
enrolled actuary for the plan must make
projections required for the current and
succeeding plan years of the current
value of the assets of the plan and the
present value of all liabilities to
participants and beneficiaries under the
plan for the current plan year as of the
beginning of such year. These
projections must be based on reasonable
actuarial estimates, assumptions, and
methods in accordance with section
431(c)(3) and that offer the actuary’s
best estimate of anticipated experience
under the plan. Notwithstanding the
previous sentence, the actuary is
permitted to rely on the plan sponsor’s
projection of activity in the industry
provided under paragraph (d)(5)(iii) of
this section. The projected present value
of liabilities as of the beginning of such
year must be determined based on the
most recent information reported on the
most recent of either—
(A) The actuarial statement required
under section 103(d) of the Employee
Retirement Income Security Act of 1974
that has been filed with respect to the
most recent year, or
(B) The actuarial valuation for the
preceding plan year.
(ii) Determinations of future
contributions. Any actuarial projection
of plan assets shall assume either—
(A) Reasonably anticipated employer
contributions for the current and
succeeding plan years, assuming that
the terms of the one or more collective
bargaining agreements pursuant to
which the plan is maintained for the
current plan year continue in effect for
succeeding plan years, or
(B) That employer contributions for
the most recent plan year will continue
indefinitely, but only if the enrolled
actuary for the plan determines there
have been no significant demographic
changes that would make such
assumption unreasonable.
(iii) Projected industry activity. The
plan sponsor shall provide any
necessary projection of activity in the
industry, including future covered
employment, to the plan actuary. For
this purpose, the plan sponsor must act
reasonably and in good faith.
(6) Treatment of amortization
extensions under section 412(e). For
purposes of section 432, if the plan
received an extension of any
amortization period under section
412(e), the extension is treated the same
as an extension under section 431(d).
Thus, such an extension is not taken
into account in determining whether a
plan has or will have an accumulated
funding deficiency under paragraph
(c)(3) and (c)(4) of this section, but it is
taken into account in determining

VerDate Aug<31>2005

16:08 Mar 17, 2008

Jkt 214001

whether a plan has or will have an
accumulated funding deficiency under
paragraph (b)(3) of this section.
(e) Notice of endangered or critical
status—(1) In general. In any case in
which the enrolled actuary for the plan
certifies that a multiemployer plan is or
will be in endangered or critical status
for a plan year, the plan sponsor must,
not later than 30 days after the date of
the certification, provide notification of
the endangered or critical status to the
participants and beneficiaries, the
bargaining parties, the Pension Benefit
Guaranty Corporation, and the Secretary
of Labor.
(2) Plans in critical status. If it is
certified that a multiemployer plan is or
will be in critical status for a plan year,
the plan sponsor must include in the
notice an explanation of the possibility
that adjustable benefits (as defined in
section 432(e)(8)) may be reduced, and
such reductions may apply to
participants and beneficiaries whose
benefit commencement date is on or
after the date such notice is provided for
the first plan year in which the plan is
in critical status. If the plan provides
benefits that are restricted under section
432(f)(2), the notice must also include
an explanation that the plan cannot pay
single sums and similar benefits
described in section 432(f)(2) that are
greater than the monthly amount due
under a single life annuity. A plan
sponsor that sends the model notice
issued by the Secretary of Labor
pursuant to section 432(b)(3)(D)(iii)
satisfies this requirement.
(3) Transition rules—(i) Early notice
permitted. If, after August 17, 2006, the
enrolled actuary for the plan certifies
that a plan is reasonably expected to be
in critical status with respect to the first
plan year beginning after 2007, then the
notice described in this paragraph (e)
may be provided before the date the
actuary certifies the plan is in critical
status for that plan year. The ability to
provide early notice does not extend the
otherwise applicable deadline for
providing the notice under paragraph
(e)(1) of this section.
(ii) Reformation of prior notice. If
notice has been provided prior to the
date required under paragraph (e)(1) of
this section, but the notice did not
include all of the information described
in paragraph (e)(2) of this section, then
that notice will not satisfy the
requirements for notice under section
432(b)(3)(D). Accordingly, the
restrictions under section 432(f)(2) will
not apply as a result of the issuance of
such a notice. However, if prior to the
date notice is required to be provided
under paragraph (e)(1) of this section
additional notice is provided that

PO 00000

Frm 00027

Fmt 4702

Sfmt 4702

includes all of the information required
under paragraph (e)(2) of this section,
then the notice requirements of section
432(b)(3)(D) are satisfied as of the date
of that additional notice and the
restrictions of section 432(f)(2) will
apply beginning on that date. In such a
case, the date of the earlier notice will
still apply for purposes of section
432(e)(8)(A)(ii) provided that the earlier
notice included all of the information
required under section 432(b)(3)(D)(ii).
(f) Effective applicability date. These
regulations apply to plan years ending
after [INSERT DATE OF PUBLICATION
OF THESE REGULATIONS IN THE
FEDERAL REGISTER] but only with
respect to plan years that begin on or
after January 1, 2008.
Linda E. Stiff,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 08–1044 Filed 3–14–08; 9:03 am]
BILLING CODE 4830–01–P

ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 52
[EPA–R05–OAR–2007–0907; FRL–8541–4]

Approval and Promulgation of Air
Quality Implementation Plans; Indiana
Environmental Protection
Agency (EPA).
ACTION: Proposed rule.
AGENCY:

EPA is proposing to approve
a request submitted by the Indiana
Department of Environmental
Management on July 20, 2007, as
supplemented on December 19, 2007, to
revise the Indiana State Implementation
Plan (SIP). The submission revises the
Indiana Administrative Code (IAC) by
amending the definition of ‘‘References
to Code of Federal Regulations,’’ to
update of the references to the Code of
Federal Regulations to refer to the 2006
edition. The rule revision also makes
minor corrections to amend the
definition of ‘‘nonphotochemically
reactive hydrocarbons’’ or ‘‘negligibly
photochemically reactive compounds,’’
and to amend the definition of ‘‘volatile
organic compound’’ or ‘‘VOC.’’
In the final rules section of this
Federal Register, EPA is approving the
SIP revision as a direct final rule
without prior proposal, because EPA
views this as a noncontroversial
revision and anticipates no adverse
comments.
A detailed rationale for the approval
is set forth in the direct final rule. If we
do not receive any adverse comments in
SUMMARY:

E:\FR\FM\18MRP1.SGM

18MRP1