Treasury issues proposed and temporary regulations on multiemployer pension plans

Tax Hot Topics
The Treasury Department recently released proposed (REG-102648-15) and temporary (T.D. 9723) regulations to implement the Kline-Miller Multiemployer Pension Reform Act of 2014 (Kline-Miller Act), as required by Congress. The Kline-Miller Act established a new process for multiemployer pension plans to propose a temporary or permanent reduction of pension benefits if the plan is projected to run out of money.

In accordance with the Kline-Miller Act, a multiemployer pension plan sponsor that believes benefit reductions are needed must submit an application to the Treasury Department showing that the reductions are necessary to keep the plan from running out of money. The temporary and proposed regulations, along with Rev. Proc. 2015-34, outline the process for multiemployer pension plans to apply for a reduction of pension benefits. Participants in these plans will be notified of any application to reduce benefits and will have the opportunity to comment on the application.

Under the Kline-Miller Act, multiemployer pension plans can consider reducing benefits only after they have taken all reasonable measures to address their financial problems. Even within plans that seek to reduce benefits, some plan participants cannot have their benefits reduced, including retirees 80 years of age and older (with partial protection beginning at age 75) and participants receiving disability benefits.

In addition to the proposed and temporary regulations, the IRS issued Rev. Proc. 2015-34, which prescribes the application process for approval of a proposed benefit suspension. It also provides a model notice that plan sponsors proposing a benefit suspension may use to satisfy the requirement to provide notice to employees and participants.

Treasury does not expect to approve applications until the proposed and temporary regulations are finalized. Any plan that applies prior to finalization of the proposed and temporary regulations may have to submit a new application or revise the proposed suspension to account for any differences between the proposed and temporary regulations and the final regulations.

Eddie Adkins
+1 202 521 1565

Jeff Martin
+1 202 521 1526

Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.