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.
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