IRC Section 432 was added to the code by the Pension Protection Act of 2006 (PPA). PPA required multiemployer defined benefit plans to submit an annual actuarial certification from the actuary no later than 90 days after the end of the plan year. The certification includes information regarding whether the plan is in Endangered status, Critical status, or Neither Endangered or Critical status. The certification also should contain a statement regarding the scheduled progress they are making in meeting the requirements of their funding improvement or rehabilitation plan.
The Employee Plans Compliance Unit (EPCU) has opened a Project that will focus on determining whether there is compliance with regard to these provisions. If the plan is not in compliance with the requirements of IRC Section 432, examinations, referrals to other agencies, or other corrective action may then be pursued.
The Project Process
Compliance contact letters were sent to approximately 150 plan sponsors who it appeared had not submitted the required certification to the IRS. The majority of the responses fell into one of the following categories:
- The plan was actually a single employer plan rather than a multiemployer plan and the Form 5500 had incorrectly checked the wrong box.
- The plan filed the certification however there was a mismatched EIN (Employer Identification Number) or plan number.
- The plan had merged with another plan and the certification was correctly and timely filed by the other entity.
- The plan had terminated and/or had a mass withdrawal and verified that the plan had been taken over by the PBGC.
- The plan had failed to provide a copy of the certification to the IRS (in some case believing that a “Green zone” plan was not required to file a certification.
- Incomplete, incorrect, or clerical error (typo, transposition, missing EIN/plan #).
If You Receive a Letter
Please provide the information requested in the letter. You may also furnish any other documents, clarifying or supplemental materials that you believe will be helpful for us to review. You should make every effort to answer the letter as accurately as possible by the due date. If you need additional time, make sure to contact the person whose name is listed on the letter for an extension before the due date. Failure to provide the information requested could result in further action or examination of your tax return.
Common questions and answers about the Multiemployer Defined Benefit Actuarial Zone Certification Project
If You Have Questions
Please feel free to e-mail us and we will be glad to answer questions you have about the project and how it relates to your situation. Please include the words “Multiemployer Certification” in the Subject
line. We are unable to respond via e-mail, so please include a contact number and the best time to reach you.