PART 4231—MERGERS AND TRANSFERS BETWEEN MULTIEMPLOYER PLANS Authority: 29 U.S.C. 1302(b)(3) Source: 83 FR 46653, Sept. 14, 2018, unless otherwise noted. Subpart A—General Provisions § 4231.1 Purpose and scope. (a) General Purpose. (2) Scope. (b) Additional requirements. § 4231.2 Definitions. The following terms are defined in § 4001.2 of this chapter: annuity, Code, EIN, ERISA, fair market value, guaranteed benefit, IRS, multiemployer plan, normal retirement age, PBGC, plan, plan sponsor, plan year, PN. Actuarial valuation Advocate Critical and declining status Critical status De minimis merger De minimis transfer Effective date (1) The date on which one plan assumes liability for benefits accrued under another plan involved in the transaction; or (2) The date on which one plan transfers assets to another plan involved in the transaction. Facilitated merger Fair market value of assets Financial assistance Financial assistance merger Insolvent Merged plan Merger Significantly affected plan (1) Transfers assets that equal or exceed 15 percent of its assets before the transfer, (2) Receives a transfer of unfunded accrued benefits that equal or exceed 15 percent of its assets before the transfer, (3) Is created by a spinoff from another plan, or (4) Engages in a merger or transfer (other than a de minimis merger or transfer) either— (i) After such plan has terminated by mass withdrawal under section 4041A(a)(2) of ERISA, or (ii) With another plan that has so terminated. Transfer transfer of assets or liabilities Unfunded accrued benefits § 4231.3 Requirements for mergers and transfers. (a) General requirements. (1) No participant's or beneficiary's accrued benefit is lower immediately after the effective date of the merger or transfer than the benefit immediately before that date (except as provided under § 4231.4(b)). (2) Actuarial valuations of the plans that existed before the merger or transfer have been performed in accordance with § 4231.5. (3) For each plan that exists after the transaction, an enrolled actuary— (i) Determines that the plan meets the applicable plan solvency requirement set forth in § 4231.6; or (ii) Otherwise demonstrates that benefits under the plan are not reasonably expected to be subject to suspension under section 4245 of ERISA. (4) The plan sponsor notifies PBGC of the merger or transfer in accordance with §§ 4231.8 and 4231.9. (b) Compliance determination. (c) Certified change in bargaining representative. (d) Informal consultation. § 4231.4 Preservation of accrued benefits. (a) General. (b) Waiver. § 4231.5 Valuation requirement. The actuarial valuation requirement under section 4231(b)(4) of ERISA and § 4231.3(a)(2) is satisfied if an actuarial valuation has been performed for the plan based on the plan's assets and liabilities as of a date not earlier than the first day of the last plan year ending before the proposed effective date of the transaction. If the actuarial valuation required under this section is not complete when the notice of merger or transfer is filed, the plan sponsor may provide the most recent actuarial valuation for the plan with the notice, and the actuarial valuation required under this section when complete. For a significantly affected plan involved in a transfer (other than a plan that is a significantly affected plan only because the transfer involves a plan that has terminated by mass withdrawal under section 4041A(a)(2) of ERISA), the valuation must separately identify assets, contributions, and liabilities being transferred and must be based on the actuarial assumptions and methods that are expected to be used for the plan for the first plan year beginning after the transfer. § 4231.6 Plan solvency tests. (a) General. (1) The plan's expected fair market value of assets immediately after the merger or transfer equals or exceeds five times the benefit payments for the last plan year ending before the proposed effective date of the merger or transfer; or (2) In each of the first five plan years beginning on or after the proposed effective date of the merger or transfer, the plan's expected fair market value of assets as of the beginning of the plan year plus expected contributions and investment earnings equal or exceed expected expenses and benefit payments for the plan year. (b) Significantly affected plans. (1) Expected contributions equal or exceed the estimated amount necessary to satisfy the minimum funding requirement of section 431 of the Code for the five plan years beginning on or after the proposed effective date of the transaction. (2) The plan's expected fair market value of assets immediately after the transaction equals or exceeds the total amount of expected benefit payments for the first five plan years beginning on or after the proposed effective date of the transaction. (3) Expected contributions for the first plan year beginning on or after the proposed effective date of the transaction equal or exceed expected benefit payments for that plan year. (4) Expected contributions for the amortization period equal or exceed the unfunded accrued benefits plus expected normal costs for the period. The enrolled actuary may select as the amortization period either— (i) The first 25 plan years beginning on or after the proposed effective date of the transaction, or (ii) The amortization period for the resulting base when the combined charge base and the combined credit base are offset under section 431(b)(5) of the Code. (c) Rules for determinations. (1) Expected contributions after a merger or transfer must be determined by assuming that contributions for each plan year will equal contributions for the last full plan year ending before the date on which the notice of merger or transfer is filed with PBGC. If expected contributions include withdrawal liability payments, such payments must be shown separately. If the withdrawal liability payments are not the assessed amounts, or are not in accordance with the schedule of payments, or include future assessments, include the basis for such differences, with supporting data, calculations, assumptions, and methods. In addition, contributions must be adjusted to reflect— (i) The merger or transfer; (ii) Any change in the rate of employer contributions that has been negotiated (whether or not in effect); and (iii) Any trend of changing contribution base units over the preceding five plan years or other period of time that can be demonstrated to be more appropriate. (2) Expected normal costs must be determined under the funding method and assumptions expected to be used by the plan actuary for purposes of determining the minimum funding requirement under section 431 of the Code. If an aggregate funding method is used for the plan, normal costs must be determined under the entry age normal method. (3) Expected benefit payments must be determined by assuming that current benefits remain in effect and that all scheduled increases in benefits occur. (4) The plan's expected fair market value of assets immediately after the merger or transfer must be based on the most recent data available immediately before the date on which the notice is filed. (5) Expected investment earnings must be determined using the same interest assumption to be used for determining the minimum funding requirement under section 431 of the Code. (6) Expected expenses must be determined using expenses in the last plan year ending before the notice is filed, adjusted to reflect any anticipated changes. (7) Expected plan assets for a plan year must be determined by adjusting the most current data on the plan's fair market value of assets to reflect expected contributions, investment earnings, benefit payments and expenses for each plan year between the date of the most current data and the beginning of the plan year for which expected assets are being determined. § 4231.7 De minimis mergers and transfers. (a) Special plan solvency rule. (b) De minimis merger defined. (c) De minimis transfer defined. (1) The fair market value of assets transferred, if any, is less than 3 percent of the fair market value of assets of all of the transferor plan's assets; (2) The present value of the accrued benefits transferred (whether or not vested) is less than 3 percent of the fair market value of assets of all of the transferee plan's assets; and (3) The transferee plan is not a plan that has terminated under section 4041A(a)(2) of ERISA. (d) Value of assets and benefits. (e) Aggregation required. (1) A merger is not de minimis if the total present value of accrued benefits merged into a plan, when aggregated with all prior de minimis mergers of and transfers to that plan effective within the same plan year, equals or exceeds 3 percent of the value of the plan's assets. (2) A transfer is not de minimis if, when aggregated with all previous de minimis mergers and transfers effective within the same plan year— (i) The value of all assets transferred from a plan equals or exceeds 3 percent of the value of the plan's assets; or (ii) The present value of all accrued benefits transferred to a plan equals or exceeds 3 percent of the plan's assets. § 4231.8 Filing requirements; timing and method of filing. (a) When to file. (1) 270 days in the case of a facilitated merger under § 4231.12; (2) 120 days in the case of a merger (other than a facilitated merger) for which a compliance determination under § 4231.10 is requested, or a transfer; or (3) 45 days in the case of a merger for which a compliance determination under § 4231.10 is not requested. (b) Method of filing. (c) Computation of time. (d) Who must file. (e) Where to file. (f) Date of filing. (g) Waiver of timing of notice. (1) A plan sponsor demonstrates to the satisfaction of PBGC that failure to complete the merger or transfer in less than the applicable notice period set forth in paragraph (a) of this section will cause harm to participants or beneficiaries of the plans involved in the transaction; (2) PBGC determines that the transaction complies with the requirements of section 4231 of ERISA; or (3) PBGC completes its review of the transaction. § 4231.9 Notice of merger or transfer. Each notice of proposed merger or transfer required under section 4231(b)(1) of ERISA and this subpart must contain the following information: (a) For each plan involved in the merger or transfer— (1) The name of the plan; (2) The name, address and telephone number of the plan sponsor and of the plan sponsor's duly authorized representative, if any; and (3) The plan sponsor's EIN and the plan's PN and, if different, the EIN or PN last filed with PBGC. If no EIN or PN has been assigned, the notice must so indicate. (b) Whether the transaction being reported is a merger or transfer, whether it involves any plan that has terminated under section 4041A(a)(2) of ERISA, whether any significantly affected plan is involved in the transaction (and, if so, identifying each such plan), and whether it is a de minimis transaction as defined in § 4231.7 (and, if so, including an enrolled actuary's certification to that effect). (c) The proposed effective date of the transaction. (d) Except as provided under § 4231.4(b), a copy of each plan provision stating that no participant's or beneficiary's accrued benefit will be lower immediately after the effective date of the merger or transfer than the benefit immediately before that date. (e) For each plan that exists after the transaction, one of the following statements, certified by an enrolled actuary: (1) A statement that the plan satisfies the applicable plan solvency test set forth in § 4231.6, indicating which is the applicable test, and including the supporting data, calculations, assumptions, and methods. (2) A statement of the basis on which the actuary has determined under § 4231.3(a)(3)(ii) that benefits under the plan are not reasonably expected to be subject to suspension under section 4245 of ERISA, including the supporting data, calculations, assumptions, and methods. (f) For each plan that exists before a transaction (unless the transaction is de minimis and does not involve either a request for financial assistance, or any plan that has terminated under section 4041A(a)(2) of ERISA), a copy of the most recent actuarial valuation report that satisfies the requirements of § 4231.5. (g) For each significantly affected plan that exists after the transaction, the following information used in making the plan solvency determination under § 4231.6(b): (1) The present value of the accrued benefits and plan's fair market value of assets under the valuation required by § 4231.5, allocable to the plan after the transaction. (2) The fair market value of assets in the plan after the transaction (determined in accordance with § 4231.6(c)(4)). (3) The expected benefit payments for the plan for the first plan year beginning on or after the proposed effective date of the transaction (determined in accordance with § 4231.6(c)(3)). (4) The contribution rates in effect for the plan for the first plan year beginning on or after the proposed effective date of the transaction. (5) The expected contributions for the plan for the first plan year beginning on or after the proposed effective date of the transaction (determined in accordance with § 4231.6(c)(1)). § 4231.10 Request for compliance determination. (a) General. (b) Single request permitted for all de minimis transactions. (c) Contents of request. (1) A copy of the merger or transfer agreement; and (2) For each significantly affected plan, other than a plan that is a significantly affected plan only because the merger or transfer involves a plan that has terminated by mass withdrawal under section 4041A(a)(2) of ERISA, copies of all actuarial valuations performed within the 5 years preceding the date of filing the notice required under § 4231.3(a)(4). § 4231.11 Actuarial calculations and assumptions. (a) Most recent valuation. (b) Assumptions. (c) Updated calculations. Subpart B—Additional Rules for Facilitated Mergers § 4231.12 Request for facilitated merger. (a) General. (2) Financial assistance. (b) Information requirements. (2) If a financial assistance merger is requested, the request must contain the information required in §§ 4231.13 through 4231.16 in addition to the information required in paragraph (b)(1) of this section. (3) PBGC may require the plan sponsors to submit additional information to determine whether the requirements of section 4231(e) of ERISA are met or to enable it to facilitate the merger. (c) Duty to amend and supplement. § 4231.13 Plan information for financial assistance merger. A request for a financial assistance merger must include the following information for each plan involved in the merger: (a) The most recent trust agreement, including all amendments adopted since the last restatement. (b) The most recent plan document, including all amendments adopted since the last restatement. (c) The most recent summary plan description (SPD), and all summaries of material modification issued since the most recent SPD. (d) If applicable, the most recent rehabilitation plan (or funding improvement plan), including all subsequent amendments and updates, and the percentage of total contributions received under each schedule of the rehabilitation plan (or funding improvement plan) for the most recent plan year available. (e) A copy of the plan's most recent IRS determination letter. (f) A copy of the plan's most recent Form 5500 (Annual Report Form) and all schedules and attachments (including the audited financial statement). (g) A current listing of employers who have an obligation to contribute to the plan, and the approximate number of participants for whom each employer is currently making contributions. (h) A schedule of withdrawal liability payments collected in each of the most recent five plan years. (i) If applicable, a copy of the plan sponsor's application for suspension of benefits under section 305(e)(9)(G) of ERISA (including all attachments and exhibits). § 4231.14 Description of financial assistance merger. A request for a financial assistance merger must include the following information about the proposed financial assistance merger: (a) A detailed description of the proposed financial assistance merger, including any larger integrated transaction of which the merger is a part (including, but not limited to, an application for suspension of benefits under section 305(e)(9)(G) of ERISA). (b) A narrative description of the events that led to the plan sponsors' decision to submit a request for a financial assistance merger. (c) A narrative description of significant risks and assumptions relating to the proposed financial assistance merger and the projections provided in support of the request. (d) A detailed description of the estimated total amount of financial assistance the plan sponsors request for each year, including the supporting data, calculations, assumptions, and a description of the methodology used to determine the estimated amounts. § 4231.15 Actuarial and financial information for financial assistance merger. A request for a financial assistance merger must include the following actuarial and financial information for the plans involved in the merger: (a) A copy of the actuarial valuation performed for each of the two plan years before the most recent actuarial valuation filed in accordance with § 4231.9(f). (b) If applicable, a copy of the plan actuary's most recent annual actuarial certification under section 305(b)(3) of ERISA, including a detailed description of the assumptions used in the certification, and the basis under which they were determined. The description must include information about the assumptions used for the projection of future contributions, withdrawal liability payments, and investment returns, and any other assumption that may have a material effect on projections. (c) A detailed statement certified by an enrolled actuary that the merger is necessary for one or more of the plans involved to avoid or postpone insolvency, including the basis for the conclusion, supporting data, calculations, assumptions, and a description of the methodology. This statement must demonstrate for each critical and declining status plan involved in the merger that the date the plan projects to become insolvent (without reflecting the merger) is earlier than the date the merged plan projects to become insolvent (the merged plan may reflect the proposed financial assistance). Include as an exhibit annual cash flow projections for each critical and declining status plan involved in the merger through the date the plan projects to become insolvent (using an open group valuation and without reflecting the merger). Annual cash flow projections must reflect the following information: (1) Fair market value of assets as of the beginning of the year. (2) Contributions and withdrawal liability payments. (3) Benefit payments organized by participant type ( e.g., (4) Administrative expenses. (5) Fair market value of assets as of the end of the year. (d) For each critical and declining status plan involved in the merger, a long-term projection (at least 50 to 90 years) of benefit disbursements by participant type ( e.g., (e) A detailed statement certified by an enrolled actuary that financial assistance is necessary for the merged plan to become or remain solvent, including the basis for the conclusion, supporting data, calculations, assumptions, and a description of the methodology. Include as an exhibit annual cash flow projections for the merged plan with the proposed financial assistance (based on the actuarial assumptions and methods that will be used under the merged plan). Annual cash flow projections must reflect the information listed in paragraphs (c)(1) through (5) of this section. In addition, include as an exhibit a statement certified by an enrolled actuary of whether the merged plan would be in critical status for purposes of paragraph (e)(1) or (2) of this section, including the basis for the conclusion. (1) If the merged plan would be in critical status immediately following the merger without the proposed financial assistance (as reasonably determined by the enrolled actuary or as set forth in this paragraph), the enrolled actuary's certified statement must demonstrate that the merged plan will avoid insolvency under section 305(e)(9)(D)(iv) of ERISA and the regulations thereunder (excluding stochastic projections) with the proposed financial assistance. The enrolled actuary may determine whether the merged plan would be in critical status based on the combined data and projections underlying the status certifications of each of the plans for the plan year immediately preceding the merger, including any selected updates in the data based on the experience of the plans in the immediately preceding plan year (reasonable adjustments are permitted but not required). (2) If the merged plan would not be in critical status immediately following the merger without the proposed financial assistance (as reasonably determined by the enrolled actuary or as set forth in paragraph (e)(1) of this section), the enrolled actuary's certified statement must demonstrate that the merged plan is not projected to become insolvent during the 20 plan years beginning after the proposed effective date of the merger with the proposed financial assistance (using the methodologies set forth under section 305(b)(3)(B)(iv) of ERISA and the regulations thereunder). If such a demonstration is possible without the proposed financial assistance, or if the amount of financial assistance requested exceeds the amount needed to satisfy this demonstration, the enrolled actuary's certified statement must demonstrate that financial assistance is necessary to mitigate the adverse effects of the merger on the merged plan's ability to remain solvent. The demonstration that financial assistance is necessary to mitigate the adverse effects of the merger on the merged plan's ability to remain solvent may be based on stress testing over a long-term period (and may reflect reasonable future adverse experience), using a reasonable method in accordance with generally accepted actuarial standards. (f) If applicable, a copy of the plan actuary's certification under section 305(e)(9)(C)(i) of ERISA. (g) The rules in § 4231.6(c) apply to the solvency projections described in paragraphs (c) and (e) of this section, unless section 305(e)(9)(D)(iv) of ERISA and the regulations thereunder apply and specify otherwise. § 4231.16 Participant census data for financial assistance merger. A request for a financial assistance merger must include a copy of the census data used for the projections described in § 4231.15(c) through (e), including: (a) Participant type (retiree, beneficiary, disabled, terminated vested, active, alternate payee). (b) Gender. (c) Date of birth. (d) Credited service for guarantee calculation ( i.e., (e) Vested accrued monthly benefit. (f) Monthly benefit guaranteed by PBGC. (g) Benefit commencement date (for participants in pay status and others for which the reported benefit will not be payable at normal retirement age). (h) For each participant in pay status— (1) Form of payment, and (2) Data relevant to the form of payment, including: (i) For a joint-and-survivor benefit, the beneficiary's benefit amount and the beneficiary's date of birth; (ii) For a Social Security level income benefit, the date of any change in the benefit amount, and the benefit amount after such change; (iii) For a 5-year certain or 10-year certain benefit (or similar benefit), the relevant defined period; or (iv) For a form of payment not otherwise described in this section, the data necessary for the valuation of the form of payment. (i) If an actuarial increase for postponed retirement applies, or if the form of annuity is a Social Security level income benefit, the monthly vested benefit payable at normal retirement age in normal form of annuity. § 4231.17 PBGC action on a request for facilitated merger. (a) General. (b) Final agency action. et seq. § 4231.18 Jurisdiction over financial assistance merger. (a) General. (b) Financial assistance agreement.