Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Proposed Rules 14417 

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 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of public hearing on 

proposed rulemaking. 

SUMMARY: 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. 

ADDRESSES: 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 

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] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–127391–07] 

RIN 1545–BH02 

Guidance Under Section 664 

Regarding the Effect of Unrelated 

Business Taxable Income on 

Charitable Remainder Trusts; 

Correction 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Correction to a notice of 

proposed rulemaking. 

SUMMARY: This document contains 

corrections to a notice of proposed 

rulemaking (REG–127391–07) that was 

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.’’. 

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 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–151135–07] 

RIN 1545–BH39 

Multiemployer Plan Funding Guidance 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This document contains 

proposed regulations under section 432 


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14418 Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Proposed Rules 

1Section 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. 

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, 

Richard.A.Hurst@irscounsel.treas.gov 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 

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 

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 


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Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Proposed Rules 14419 

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 

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 

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 


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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 

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 

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 General Rules Relating to 

Section 432 

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 


rwilkins on PROD1PC63 with PROPOSALS
Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Proposed Rules 14421 

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 

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 

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 


rwilkins on PROD1PC63 with PROPOSALS
14422 Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Proposed Rules 

2Under 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. 

3See 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. 

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 

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 

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. 


rwilkins on PROD1PC63 with PROPOSALS
Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Proposed Rules 14423 

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: 

§ 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 

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. 

(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 


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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. 

(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 

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 


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Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Proposed Rules 14425 

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), 

(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 

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 


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 

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 

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 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: 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 


rwilkins on PROD1PC63 with PROPOSALS