IRS Releases Guidance on Funding Relief for Multiemployer Plans

On November 26, 2010, the IRS released Notice 2010-83, which provides guidance on the special funding relief rules available to multiemployer pension plans under the Pension Relief Act of 2010.  This guidance had been anticipated since the Pension Relief Act was signed into law on June 25, 2010.

Notice 2010-83 is posted on the IRS website, along with a summary of its key provisions.  The guidance is presented in a question and answer format.  Notice 2010-83 follows Notice 2010-56, which was released on July 30, 2010 and contained preliminary guidance on the Pension Relief Act of 2010.

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Available for download is a HORIZON BULLETIN (updated December 13, 2010) summarizing the provisions of the Pension Relief Act of 2010 affecting multiemployer plans, reflecting the guidance provided by the IRS in Notice 2010-83.

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The following are key pieces of guidance provided by Notice 2010-83:
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• The 2008 and 2009 investment losses eligible for relief are determined on a market valuebasis, rather than the less favorable actuarial value basis, as some had feared.
• For plans electing relief, it appears the restriction on benefit improvements will range from three to twelve years, depending on how much of the available relief is utilized.  (The language of PRA 2010 hinted that the restriction might apply for as long as 32 years.)  Restrictions do not apply if the benefit improvements are funded through increased contributions or are required by law.  Further clarification on this issue may be needed.
• Plans can shorten the benefit increase restriction period at any time by opting out of relief prospectively, without losing the effect of the relief applied prior to opting out.
• The PPA certification status for the current plan year may be revised to reflect funding relief, but re-certification is not required.  (Any re-certification must be done before the end of the plan year to which the re-certification applies.)  Similarly, a plan may (but is not required to) update a previously-adopted funding improvement plan or rehabilitation plan to reflect the funding relief.
• Details are provided regarding the manner and timing of the relief election and the required notices to plan participants and the PBGC.  Generally, Trustees must make a formal decision to use the special rules by the earlier of the date of the 2011 actuarial certification or June 30, 2011.