SECTION 4. DEMONSTRATION

THAT THE PROPOSED SUSPENSION SATISFIES THE STATUTORY REQUIREMENTS

The application must include the following information to demonstrate that certain statutory limitations and notice requirements are satisfied with respect to the proposed suspension of benefits:

.01 Demonstration that limitations on individual suspensions are satisfied . A demonstration of how the proposed suspension satisfies the limitations described in § 432(e)(9)(D)(i), (ii), and (iii). ³ The demonstration must include:

(1) A sample calculation applying

the 110 percent limitation under § 432(e)(9)(D)(i) for an individual in each category or group identified in accordance with

3The sample calculations submitted pursuant to this section 4.01 must not include personally identifiable information relating to any individual.

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section 2.02(3) of this revenue procedure. Each sample calculation must identify how the monthly benefit that would be guaranteed under section 4022A of ERISA is calculated (assuming, for this purpose, that no portion of the individual’s benefit under the plan is subject to permitted forfeiture under § 411(a), due, for example, to a failure to vest in accordance with the vesting schedule specified under the plan). The calculation must identify the extent, if any, to which the monthly guaranteed benefit calculated under section 4022A is reduced on account of any of the following limitations or exclusions: (a) The section 4022A(a) exclu sion of certain forfeitable benefits (for example, increased benefits that have not become part of the accrued benefit). (b) The section 4022A(b)(1)(A)

exclusion of certain benefits and benefit increases in effect for less than 60 months. (c) The limitations contained in

the section 4022A(c)(2) definition of the accrual rate used for calculating the monthly guaranteed benefit (the accrual rate must be based on a benefit that is no greater than the monthly benefit payable under the plan at normal retirement age in the form of a single life annuity (for example, if the benefit reflected an actuarial increase related to delayed retirement or is paid in the form of a social security level income option) and must be calculated without regard to any reduction under § 411(a)(3)(E), divided by years of credited service (credited service cannot exceed 1 year for any year of participation)). (d) The section 4022A(d) limi tation that the guaranteed benefit will not exceed the

benefit calculated under the plan as reduced under § 411(a)(3)(E). (e) The section 4022A(e) exclu sion, pursuant to section 4022(b)(6), of benefits that would not be guaranteed if paid under a single-employer plan (benefits paid from a plan that does not satisfy the requirements of § 401(a) or § 404(a)(2)). (2) With respect to benefits based on

disability, as calculated using the plan’s definition of disability: (a) A description of each benefit

based on disability, as defined under the plan, that is paid to an individual under the plan, and (b) A sample calculation under

§ 432(e)(9)(D)(iii) for an individual in each category or group identified in accordance with section 2.02(3) of this revenue procedure for each type of benefit based on disability that shows how the plan determines the extent to which any retirement benefit paid with respect to a participant who commenced benefits as a result of disability is, or is not, treated as a benefit based on disability. If the plan provides to a disabled individual a benefit that is not described in the plan as a disability benefit (for example, a retirement benefit paid at normal retirement age that is greater than a disability benefit paid before normal retirement age), then the calculation must show the extent to which the retirement benefit is, or is not, a benefit based on disability. (3) A sample calculation for an in dividual in each category or group identified in accordance with section 2.02(3) of this revenue procedure that shows how the proposed suspension satisfies the age-based limitations of § 432(e)(9)(D)(ii), taking into

account the guarantee-based limitation of § 432(e)(9)(D)(i). If the plan provides a benefit of the type described in the second sentence of paragraph 4.01(2)(b) of this revenue procedure, then the sample calculation must show how the proposed suspension satisfies the age-based limitations taking into account both the guarantee-based limitation and the disability-based limitation. .02 Demonstration that the proposed suspension is reasonably estimated to enable the plan to avoid insolvency . A demonstration that, in accordance with § 432(e)(9)(D)(iv), the proposed benefit suspension (considered, if applicable, in combination with a proposed partition of the plan under section 4233 of ERISA) is reasonably estimated to enable the plan to avoid insolvency. The demonstration must include:

(1) An illustration, prepared on a de terministic basis, showing that: (a) For each plan year beginning

on the effective date of the proposed suspension and throughout an extended period as described in regulations under § 432(e)(9), the plan’s solvency ratio - the ratio of the plan’s available resources (as defined in § 418E(b)(3)) to the scheduled benefits payable under the plan for the plan year – is projected to be at least 1.0. (b) If the plan’s projected funded

percentage at the end of the extended period is less than or equal to 100 percent, then neither the plan’s solvency ratio nor its available resources are projected to decrease in any of the last five plan years of the extended period. (2) An illustration using stochastic

projections that reflect variance in investment return that the probability the plan will avoid insolvency throughout the extended period as a result of the proposed suspension is greater than 50 percent. (The plan sponsor of a plan that is not described

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within each different category or group of individuals referred to in section 4.04(3) of this revenue procedure, taking into account the effect of the individual limitations under § 432(e)(9)(D)(i), (ii), and (iii). This can be expressed as a count of individuals within the category or group whose benefits are not reduced, or are reduced by a percentage within a range not exceeding 10 percent. For example, the distribution could show a count of the individuals who have no reduction, a reduction of 10 percent or less, a reduction of 20 percent or less but more than 10 percent, etc. .05 Notice . A description of the plan sponsor’s method for satisfying the notice requirements under § 432(e)(9)(F), including the following information:

(1) For each category or group of

individuals described in section 2.02(3) of this revenue procedure, a copy of each type of actual notice ⁴ that has been or will be given to an individual in that category or group. (This is required even if the plan sponsor uses the model notice in Appendix A.) (2) A description of the efforts that

are being made to contact participants, beneficiaries and alternate payees. (3) A description of the steps the

plan sponsor has taken to ensure that any electronically delivered notices are reasonably accessible to the recipients. (4) A list of:

(a) Each employer that has an ob ligation to contribute within the meaning of section 4212(a) of ERISA, and (b) Each employee organization

representing participants under the plan.

in § 432(e)(9)(B)(v)(I) is not required to use stochastic projections in demonstrating that the plan will avoid insolvency; however, if the plan sponsor chooses to use stochastic projections for this purpose, then it must provide this illustration.) (3) A description of each of the as sumptions used, including: (a) If the actuarial assumptions

used for the deterministic projections differ from those used under section 3.01 of this revenue procedure, a justification for that difference. (b) With respect to the stochas tic projections described in section 4.02(2) of this revenue procedure, the assumed mix of assets (and how it compares with the current mix of assets), the distribution of returns for each asset class, and the correlation among those rates of returns and any other economic variables in the projections. (c) If the actuarial assumptions

used for stochastic projections as described in section 4.02(2) of this revenue procedure differ from those used for deterministic projections as described in section 4.02(1) of this revenue procedure (other than those related to investment returns), a justification for that difference. .03 Demonstration that the proposed suspension is reasonably estimated to not materially exceed the level neces- sary to avoid insolvency . In the case of a plan that is not applying for a partition in combination with a suspension, a demonstration that, in accordance with § 432(e)(9)(D)(iv), the proposed benefit suspension is reasonably estimated to not materially exceed the level necessary to enable the plan to avoid insolvency. For this purpose, the assumptions used must be the same as those used for purposes of 4.02 of this

revenue procedure. The demonstration must include an illustration of the measures described in section 4.02(1) of this revenue procedure (and, if applicable to the plan, section 4.02(2) of this revenue procedure) showing that, if the dollar amount of the proposed suspension for each participant and beneficiary were reduced by 5 percent, then the proposed suspension would not reasonably be estimated to enable the plan to avoid insolvency. .04 Demonstration that the proposed benefit suspension is distributed equi- tably . A demonstration that, in accordance with § 432(e)(9)(D)(vi), the proposed benefit suspension is distributed in an equitable manner across the participant and beneficiary population.

(1) With respect to this demonstra tion, the application must identify the factors (for example, those listed in section § 432(e)(9)(D) (vi)(I) through (XI)) that were taken into account in designing the proposed suspension. (2) If none of the factors listed in

§ 432(e)(9)(D)(vi)(I) through (XI) were taken into account, then the application must explain why those factors were not considered relevant in designing the proposed suspension. (3) If the proposed suspension ap plies differently to different categories or groups of individuals, then the application must state the approximate number of individuals in each category or group, the average monthly benefit before and after the suspension for individuals in that category or group, and the aggregate present value of the reduction in benefits for all individuals in that category or group. The application must also explain how any differences in the applicable benefit suspension formulas for the different categories or groups of individuals result from a reasonable application of the relevant factors. (4) A demonstration of the distribu tion of the benefit suspension

4The copy of the notice(s) attached to the application must not include personally identifiable information with respect to any individual, such as a name or social security number.

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