UPS Opposes Proposed Regs on Suspension of Pension Benefits

United Parcel Service, Inc., on behalf of its controlled group (collectively, "UPS"), respectfully submits these comments to the U.S. Department of the Treasury ("Treasury"), regarding the Proposed Treasury Regulation Section 1.432(e)(9)-1(d)(8) (the "2016 Proposed Regulation").¹ UPS opposes the 2016 Proposed Regulation as an impermissible interpretation of Section 432(e)(9)(D)(vii) of the Internal Revenue Code of 1986 (the "Code"), as amended by the Multiemployer Pension Reform Act of 2014 ("MPRA").

UPS has previously submitted two other comment letters to Treasury regarding MPRA and its application. First, on December 5, 2015, UPS submitted a comment letter (the "Original Comment Letter") regarding a pending application by the Board of Trustees of the Central States, Southeast and Southwest Areas Pension Plan (the "CSPF"), dated September 25, 2015 (the "Application"). The Application requests that Treasury, pursuant to MPRA, approve benefit suspensions that are otherwise prohibited by the anti-cutback rule of Code Section 411(d)(6). The Original Comment Letter explained that the Application is inconsistent with various provisions of MPRA and the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 701 et seq. Second, on March 1, 2016, UPS submitted a supplemental comment letter (the "Supplemental Comment Letter") to explain why the Application is also inconsistent with the 2016 Proposed Regulation.

UPS now submits this further comment letter ("Further Comment Letter") to explain why the 2016 Proposed Regulation is inconsistent with MPRA and also is impermissibly vague. This Further Comment Letter assumes familiarity with the Original and Supplemental Comment Letters.

I. EXECUTIVE SUMMARY

MPRA changed the legal landscape governing accrued benefits provided under multiemployer pension plans, by allowing severely underfunded plans to suspend such benefits despite the anti-cutback rule. However, MPRA imposes strict conditions and limitations on any such proposed suspension of benefits.

One key limitation of MPRA for benefit suspensions is codified at 26 U.S.C. § 432(e)(9)(D)(vii). That statutory provision affords different degrees of protection to benefits depending on the conduct of the employer to whom the obligation to pay benefits is attributable and requires that, if benefits are to be suspended, those benefits be suspended only in a statutorily specified sequence or order.²

Benefits in "Tier I" are those attributable to service for an employer that withdrew from a multiemployer plan but failed to pay the full amount of its withdrawal liability, thereby imposing additional obligations on the plan and its other contributing employers. Benefits in "Tier III" are those attributable to service for an employer that, upon withdrawal from a multiemployer plan, not only paid the full amount of its withdrawal liability, but also agreed to backstop certain of the benefits due under the multiemployer plan, if the plan later failed to satisfy its obligations to pay those benefits. Benefits in "Tier II" are all other benefits payable by the plan, including those attributable to service for an employer that has not withdrawn from the plan. The statute requires that Tier I benefits be suspended to the maximum extent permissible before any Tier II benefits may be suspended, and that all Tier II benefits that may be suspended in turn be suspended before any Tier III benefits may be suspended.

MPRA's three-tiered suspension ordering rule serves two objectives. First, it disfavors benefits attributable to employers that behaved irresponsibly by withdrawing from a plan and not paying appropriate withdrawal liability, thereby saddling the plan and other contributing employers with additional benefit-funding obligations. Second, it favors benefits attributable to employers who behaved particularly responsibly upon their withdrawal from the plan, by not only paying the full amount of withdrawal liability but also agreeing to backstop certain benefits payable by the plan in the first instance. Relatedly, it prevents the trustees of underfunded plans, who the Supreme Court has recognized have serious conflicts of interests, from attempting to shift liabilities onto such particularly responsible employers. It is undisputed that UPS, when it withdrew from the CSPF, was such a particularly responsible employer.

Nonetheless, in its Application, the CSPF improperly proposes to suspend substantial Tier III benefits when substantial Tier II benefits that may be suspended have not been suspended, and when some participants with Tier II benefits have not had any of their benefits suspended at all. In response to the Application, UPS submitted its Original Comment Letter, which demonstrated, among other things, that the CSPF's proposed benefit suspension plan blatantly violates MPRA's suspension ordering rule.

Two months after UPS submitted the Original Comment Letter, Treasury published the 2016 Proposed Regulation in the Federal Register.³ The preamble to the 2016 Proposed Regulation acknowledges that MPRA's three-tiered scheme is intended to provide special protection to Tier III participants and their employers. The preamble further recognizes that Code Section 432(e)(9)(D)(vii) imposes a strict ordering rule as between Tier I and Tier II. However, rather than also similarly respect Code Section 432(e)(9)(D)(vii) as a strict ordering rule as between Tier II and Tier III, the 2016 Proposed Regulation downgrades Code Section 432(e)(9)(D)(vii) in this regard into a mere anti-discrimination rule -- specifically, one providing only that Tier III benefits cannot be cut more than benefits in any other Tier. The preamble further indicates that Treasury is considering an alternative anti-discrimination rule under which Tier III benefits would have to be cut less than benefits in any other Tier. The 2016 Proposed Regulation is legally invalid for at least three independent reasons.

First, in substituting an anti-discrimination rule for an ordering rule, the 2016 Proposed Regulation conflicts with the text and purpose of Code Section 432(e)(9)(D)(vii). That provision states that suspensions "shall" be applied "first" to Tier I, "second" to Tier II, and "third" to the carved-out benefits in Tier III. Moreover, it further states that Tier I suspensions shall be applied "to the maximum extent permissible," and that Tier II suspensions must then be applied to "all other benefits that may be suspended." Thus, like many other statutes using an ordinal structure to govern the distribution of limited assets, Code Section 432(e)(9)(D)(vii) must be read to establish a strict ordering rule pursuant to which any benefit suspensions occur in the statutorily specified sequence. The text of Code Section 432(e)(9)(D)(vii) unambiguously so requires. Moreover, such an understanding of Code Section 432(e)(9)(D)(vii) best serves the statutory purpose of making the benefits of participants of particularly responsible Tier III employers the targets of last resort, and is confirmed by contemporaneous interpretations of MPRA. In contrast, the 2016 Proposed Regulation adopts an ordering rule as between Tiers I and II but a mere anti-discrimination rule as between Tiers II and III, and thereby impermissibly allows benefit suspensions to be applied to Tier II and Tier III benefits simultaneously rather than "second" and "third." Such an approach is contrary to the statutory language and fails to fulfill the statutory purpose of Code Section 432(e)(9)(D)(vii).

Treasury's purported justifications for this a textual proposed regulation that fails to fulfill the statute's purpose are without merit. Contrary to the preamble, reading Code Section 432(e)(9)(D)(vii) according to its plain terms, and thereby treating it as a strict sequencing rule, does not render any statutory phrase superfluous; nor does it require any rewriting of the statute. On the contrary, it is the 2016 Proposed Regulation that would actually create statutory surplusage and rewrite the statute. Indeed, Treasury completely fails to explain why the statute would have used the "second" and "third" phrasing to create an anti-discrimination rule, especially after using "first" and "second" to create an ordering rule. Treasury also fails to offer a plausible reason either for reading Code Section 432(e)(9)(D)(vii) differently from similar statutory ordering rules or for so undermining the statutory purpose of Code Section 432(e)(9)(D)(vii).

Second, even if Code Section 432(e)(9)(D)(vii) could be read as an anti-discrimination statute,Treasury's proposed interpretation of it would still be impermissible if limited only to facial discrimination against Tier III benefits -- as the 2016 Proposed Regulation can, but should not, be read to do. Neither precedent nor logic justifies an anti-discrimination rule that covers only facial discrimination. In the specific context of employee benefits, Treasury itself has interpreted anti-discrimination rules to encompass discrimination both on the face of a plan and in its effect. Moreover, the Supreme Court has always treated anti-discrimination laws as prohibiting intentional discrimination, even if accomplished through facially neutral criteria, and has further held that effects-based statutes should be understood to prohibit disparate impact on protected classes. A regulation that prohibits only facial discrimination is especially inappropriate in this context, where the regulated plan trustees are indisputably biased and where actuaries can easily manipulate facially neutral factors to produce discriminatory effects, and do so deliberately. In short, treating Code Section 432(e)(9)(D)(vii) as merely preventing facial discrimination against Tier III benefits would wholly fail to serve the statute's clear and acknowledged purpose.

Third, the 2016 Proposed Regulation and the alternative under consideration are impermissibly vague. Not only is the 2016 Proposed Regulation unclear about the anti-discrimination tests it embraces (whether facial, intentional, or in effect), it is also unclear about how discrimination is to be measured. The 2016 Proposed Regulation provides that the putative non -discrimination requirement "is satisfied if no participant's benefits that are directly attributable to service with an employer described in [Tier III] are reduced more than that participant's benefits would have been reduced if, holding the benefit formula, work history, and all relevant factors used to compute benefits constant, those benefits were attributable to service with an employer that is not described in [Tier III]."⁴ This formulation, especially when considered in conjunction with the preamble, is unclear about whether discrimination is to be measured on an aggregate or individualized basis. Nor does it specify which benefit formula (the one in the underlying pension plan or the one in the proposed suspension plan) must be held constant, or what "relevant factors" must be considered. The 2016 Proposed Regulation is also unclear about whether benefit suspensions are to be measured in absolute or percentage terms. Indeed, it is vague even about preserving a clear ordering rule as between Tier I and Tier II. Compounding these problems, neither the 2016 Proposed Regulation nor its preamble explains the intended differences between the primary proposal and the alternative that Treasury is also considering; and it is unclear whether or why Treasury would publish and solicit comments on two alternative proposals simply to address whether reductions in perfect equipoise, as between Tier II and Tier III, should fall on one or the other side of the line. If not substantially clarified (and republished for appropriate comment), the 2016 Proposed Regulation would violate both the Due Process Clause and the APA.

II. BACKGROUND

Code Section 432(e)(9)(D) imposes various "limitations" on the suspension of accrued benefits. Among other things, it prohibits suspensions of monthly benefits below 110% of the amount guaranteed by the Pension Benefit Guaranty Corporation (the "PBGC"); it prohibits suspensions of benefits for individuals 80 years or older beyond specified levels; and it prohibits suspension of disability benefits.⁸ It also provides that "[a]ny suspensions of benefits, in the aggregate . . ., shall be reasonably estimated to achieve, but not materially exceed, the level that is necessary to avoid insolvency."⁹ Further, "[a]ny suspensions of benefits" must be "equitably distributed across the participant and beneficiary population," taking into account a nonexclusive list of eleven factors that may include the "[e]xtent to which benefits are attributed to service with an employer that failed to pay its full withdrawal liability."¹⁰

Most relevant here, Code Section 432(e)(9)(D)(vii) also creates a specific ordering rule for benefit suspensions -- that is, a rule specifying the sequence in which permissible benefit suspensions must occur. Benefit suspensions must "first" be applied, "to the maximum extent permissible," to benefits in Tier I, which are "benefits attributable to a participant's service for an employer which withdrew from the plan and failed to pay . . . the full amount of its withdrawal liability."¹¹ Benefit suspensions must "second" be applied to benefits in Tier II, which is the remainder category that comprises "all other benefits" that fall in neither Tier I nor Tier III.¹² And benefit suspensions only "third" may be applied to benefits in the protected Tier III, which consists of benefits attributable to service with an employer that has withdrawn from the plan, paid the full amount of its withdrawal liability, and assumed, pursuant to a collective bargaining agreement, liability for providing benefits to participants and beneficiaries "in an amount equal to any amount of benefits . . . reduced as a result of the financial status of the plan."¹³

At the same time, UPS entered into a 2007-2013 National Master Agreement with the International Brotherhood of Teamsters (the "IBT") (the "2007-2013 NMA"). In that agreement, UPS agreed to establish a new single-employer pension plan (the "UPS/IBT Plan") that accepted $1.3 billion¹⁵ of the CSPF's previous liabilities with respect to certain UPS participants. UPS also agreed, under specified conditions, to "backstop" certain benefits payable from the CSPF to UPS employees who were transferred to the UPS/IBT Plan.¹⁶ Specifically, if the CSPF lawfully reduces certain benefits for employees covered by the UPS/IBT Plan, UPS may in specified circumstances be required to increase benefits under the UPS/IBT Plan to make up for these reductions.

The Application would suspend all Tier I benefits that may be suspended under MPRA, but does not do the same for Tier II benefits. Instead, it generally proposes concurrently to suspend both Tier II and Tier III benefits pursuant to a formula that distinguishes among the participants based on prescribed criteria that cut across the two tiers. Specifically, the Application categorizes participants' benefits in Tiers II and III based on whether each participant is an active plan participant or a terminated vested participant, and whether the participant has accrued at least 20 years of service credit.²⁰ Except for terminated vested participants with fewer than 20 years of service credit -- whose benefits would be reduced to 0.5% of the contributions made on their behalf as of July 1, 2016 -- all participants with Tier II or Tier III benefits would have their monthly benefits reduced to 1.0% of the contributions made on their behalf as of July 1, 2016.²¹ The majority of UPS participants with Tier III benefits are terminated vested participants with fewer than twenty years of service credit, and are therefore disproportionately impacted by the CSPF's proposed suspension plan.²²

Under this proposed suspension, more than a third of participants with Tier II benefits would experience no benefit suspensions at all.²³ At the same time, more than a quarter of participants with Tier III benefits would have their benefits reduced to the lowest amount permitted under MPRA -- 110% of the maximum amount guaranteed by the PBGC -- the same reduction applied to benefits in Tier I.²⁴

Indeed, far from providing the preferential treatment to Tier III benefits that MPRA mandates, the CSPF proposal would cut Tier III benefits disproportionately. In particular, the CSPF's proposal to cut both Tier II and Tier III benefits to 1.0% of contributions for anyone who is not a terminated vested participant with less than 20 years of contributory service has a substantial and disproportionate adverse effect on Tier III benefits. Many Tier II participants have accrued all of their benefits after 2004 at the CSPF's 1.0% benefit accrual rate, so the proposal to suspend benefits above 1.0% of contributions will not reduce any benefits for these participants.²⁶ In contrast, UPS's participants ceased accruing benefits in 2007, and most of their benefits were accrued under the CSPF's older 2.0% benefit accrual rate. Even worse, more than 70% of Tier III participants are placed in the disfavored terminated vested category with a proposed 0.5% of contributions formula. This significantly and adversely affects these participants, leaving Tier III participants $725 million worse off in the aggregate than they would have been had their benefits been reduced by the same percentage as the Tier II participants' benefits.²⁷ In total, Tier III participant benefits are cut on average over twice as much as Tier II participant benefits.

In the preamble to the 2016 Proposed Regulation, Treasury acknowledged that the purpose of MPRA's three-tiered scheme in Code Section 432(e)(9)(D)(vii) is to "protect[] a [Tier] III employer from the possibility that [a] suspension would be expressly designed to take advantage of the employer's agreement to make participants and beneficiaries whole for the reductions."²⁸ Treasury further acknowledged the statutory ordering rule as between Tier I and Tier II, in concluding that "reductions with respect to benefits attributable to service with a [Tier] I employer must be applied first to the maximum extent permissible before reductions are permitted to be applied to any other benefits."²⁹ "Only if such a suspension is not reasonably estimated to achieve the level that is necessary to enable the plan to avoid insolvency may a suspension then be applied to other benefits that are permitted to be suspended and that are attributable to a participant's service with other employers."³⁰

As between Tier II and Tier III, however, the 2016 Proposed Regulation proposes to downgrade the statutory ordering rule into a mere anti-discrimination rule specifying only that Tier III benefits cannot be cut more than benefits in any other Tier. Specifically, it states that a suspension plan may not provide for a "greater reduction in benefits" under Tier III "than the reduction that is applied to benefits" under another tier.³¹ It then elaborates: "This requirement is satisfied if no participant's benefits that are directly attributable to service with an employer described in [Tier III] are reduced more than that participant's benefits would have been reduced if, holding the benefit formula, work history, and all relevant factors used to compute benefits constant, those benefits were attributable to service with an employer that is not described in [Tier III]."³²

The regulatory preamble indicates that Treasury is also considering an alternative anti-discrimination rule -- one which "would require that any . . . suspension of benefits be applied to provide for a lesser reduction in benefits that are directly attributable to service with a [Tier] III employer than to benefits that are attributable to any other service."³³ "The alternative approach could be satisfied if, for example, benefits that are directly attributable to service with a [Tier III] employer are reduced less, on a percentage basis, than benefits would have been reduced if, holding constant the benefit formula, work history, and all other relevant factors used to determine benefits, those benefits were attributable to service with any other employer."³⁴ Treasury specifically requests comments "regarding whether satisfaction of the alternative rule . . . should be required on an individual-by-individual basis or on an aggregate basis (comparing the aggregate suspension of benefits that are directly attributable to service with a [Tier] III employer to what the aggregate would have been if, holding constant the benefit formula, work history, and all other relevant factors used to determine benefits, those benefits were attributable to service with any other employer)." ³⁵ And, notwithstanding the 2016 Proposed Regulation, Treasury also seeks comment on whether Tier II cuts should be imposed "to the maximum extent permissible" before any Tier III cuts are made.³⁶

III. IN SUBSTITUTING AN ANTI-DISCRIMINATION RULE FOR AN ORDERING RULE, THE 2016 PROPOSED REGULATION CONFLICTS WITH CODE SECTION 432(E)(9)(D)(VII)

In proposing to treat Code Section 432(e)(9)(D)(vii) as an anti-discrimination rule rather than an ordering rule, the 2016 Proposed Regulation advances an interpretation of MPRA that is contrary to the statutory language and purpose. Treasury must abandon it.

Code Section 432(e)(9)(D)(vii) provides that, for plans with employers that have withdrawn and put in place a backstop provision, "benefits suspended under [MPRA] shall":

This statutory wording is critical and unambiguous. Tier III benefits are expressly carved out from the benefits that can be suspended at the "second" stage, leaving them as a separate Tier to which suspensions may be applied only "third." Also, the word "all" in Tier II's phrasing -- as used here and elsewhere in ERISA -- means 100 percent, ³⁹ and the phrase "that may be suspended under [MPRA]" incorporates MPRA's other suspension limitations -- such as those tied to age, disability, and 110% of the PBGC guarantee.⁴⁰ Thus, the phrase "all other benefits that may be suspended" in Tier II means that, when it comes to suspensions of other benefits, every suspendable benefit within Tier II must be suspended, prior to suspensions of benefits in Tier III -- which are expressly protected. Those Tier III benefits may be suspended only "third." In short, the plain language of Code Section 432(e)(9)(D)(vii) requires an ordered application of benefit suspensions, under which benefits in a higher tier cannot be suspended at all so long as any benefits in a lower tier may still lawfully be suspended (and "all," not merely some, benefits within Tier II must be subject to suspension when Tier II benefits are suspended).

Reading Code Section 432(e)(9)(D)(vii) according to its plain language -- and treating it as a strict sequencing rule -- is consistent with the way similarly structured federal statutes have been interpreted, in the specific context of ERISA and elsewhere. As an example, Section 4044 of ERISA contains an order of priority for allocating assets to pay benefits upon termination of a single-employer pension plan in a sequence from "first" to "sixth."⁴¹ The regulations under Section 4044 confirm that each category in Section 4044 must be fully exhausted before moving to the next category:

Sections 507 and 726 of the Bankruptcy Code also set forth similar ordering rules to govern the distribution of limited assets. Like Code Section 432(e)(9)(D)(vii), these statutes set forth lists prefaced by ordinal numbers, and both are applied as strict sequencing rules. Indeed, neither of these statutes explicitly states that each tier of claims must be fully satisfied before any distribution can be made to a subsequent tier; yet the use of an ordered list in each is universally understood as creating strict ordering rules.⁴⁴

Such ordering rules are a conventional if not necessary method used in statutory schemes that require distributing limited assets to competing claimants. Ordering rules "reflect[] a decision by Congress to prefer certain categories of claims over other categories of claims,"⁴⁵ and provide a degree of commercial certainty by guaranteeing the "evenhanded and predictable treatment" of competing claimants.⁴⁶ Agencies and courts are therefore required strictly to follow the priorities created by these ordering rules, and "are not free to fashion new priorities or subclasses of priority to effectuate their own notions of equity."⁴⁷

Like the ordering provisions of Section 4044 of ERISA and the Bankruptcy Code, the text and context of Code Section 432(e)(9)(D)(vii) establish statutory priorities for benefit suspensions in severely underfunded, multi-employer pension plans that seek to impose cuts otherwise prohibited by the anti-cutback rule. Code Section 432(e)(9)(D)(vii) reflects an evident -- and eminently sensible -- statutory purpose to prioritize benefits based on the behavior of the respective employers whose activities gave rise to the benefit obligations in the first place. Specifically, the three-tiered statutory structure recognizes that Tier I benefits should be suspended before any others, because such benefits are attributable to particularly irresponsible employers that did not even fully fund their benefit obligations. Moreover, the same structure seeks to afford the greatest protection to benefits attributable to service with particularly responsible employers, who paid withdrawal liability and made backstopping commitments. Tier II serves as the catchall, covering all benefits that are neither disfavored under Tier I nor preferred under Tier III. Any other interpretation of the statute ignores the evident statutory purpose to correlate the degree of benefit protection to the behavior of the responsible employers.

The broader structure of MPRA, which includes a complex set of limitations on benefit suspensions, further reinforces this understanding. As discussed above, the MPRA imposes three categorical prohibitions on suspensions: benefits cannot be reduced below 110 percent of the PBGC guarantee;⁴⁸ benefits cannot be suspended for individuals age 80 or above;⁴⁹ and disability benefits cannot be suspended.⁵⁰ Subject to these categorical protections, the statute generally requires an equitable distribution of suspensions, taking into account a non-exhaustive list of eleven factors.⁵¹ But, as explained above, Code Section 432(e)(9)(D)(vii) also sets forth a specific ordering rule for the particular circumstance where some employers acted particularly responsibly and others particularly irresponsibly. This precise and reticulated statutory scheme -- with some benefits not subject to suspension at all, others subject to suspension only in a specified order, and yet others subject to suspension governed by more general equitable considerations -- serves express statutory purposes and is not subject to administrative revision.⁵²

Contemporaneous understandings confirm that Congress intended Code Section 432(e)(9)(D)(vii) to be an ordering rule pursuant to which Tier III benefits could not be suspended unless all Tier I and Tier II benefits capable of suspension had been suspended. The bill summary for MPRA, in describing Code Section 432(e)(9)(D)(vii), states that "the benefits suspended shall be applied according to three specified priorities."⁵³ Moreover, shortly before MPRA was enacted, the Congressional Research Service reiterated the same conclusion:

The ordering rule required by Code Section 432(e)(9)(D)(vii) is fundamentally different from the anti-discrimination rule set forth in the 2016 Proposed Regulation. By its terms, MPRA requires that "all" Tier II benefits "that may be suspended" must be suspended at the "second" step in the ordering.⁵⁸ Tier III benefits are expressly carved out from this second step, and suspensions can be applied to them only "third."⁵⁹ By contrast, the 2016 Proposed Regulation would permit Tier II and Tier III benefits to be reduced simultaneously, thereby collapsing the Tiers, so long as reductions under Tier III are not "greater" than those under Tier II.⁶⁰ While the 2016 Proposed Regulation refers to this approach as a "coordinated application" of suspensions,⁶¹ it blatantly contradicts the ordered application of suspensions required by the statute. And Treasury's asserted justifications for this construction of the statute are entirely unsound.

Treasury principally reasons that, because Code Section 432(e)(9)(D)(vii)(II) lacks the "to the maximum extent permissible" language set forth in Code Section 432(e)(9)(D)(vii)(I), maintaining the ordering rule as between Tier II and Tier III would either render the language in clause (I) surplusage or effectively rewrite clause (II) by adding it there.⁶² However, reading the statute as an ordering rule does not reduce the language in clause (I) to surplusage because, as Treasury itself recognizes, this language helps effect the ordering rule as between Tier I and Tier II.⁶³ And while the "to the maximum extent permissible" phrase is not used in clause (II), other statutory text and structure dictate the same result and thus do not, as Treasury suggests, require a rewriting of clause (II). Specifically, as detailed above, the statute requires that suspensions be applied "second" to "all other benefits that may be suspended," with Tier III benefits expressly carved out into a separate category for which suspensions may be applied only "third." Accordingly, it was simply not necessary for MPRA to state that Tier II benefits were to be suspended to the maximum extent permissible, as the "all other benefits" language, combined with the "second" instruction and the "except[ion]" for Tier III benefits, achieved the same result.

That is, contrary to the CSPF's argument,⁶⁴ this combined phrasing not only defines the scope of benefits within Tier II, but also dictates the extent to which Tier II benefits must be suspended before any suspensions can be applied to Tier III. MPRA was under no obligation to use identical phrasing to achieve a similar result, as there is no "canon of interpretation that forbids interpreting different words used in different parts of the same statute to mean roughly the same thing."⁶⁵ Indeed, given that clause (II) requires suspensions to "all" and not merely "some" Tier II benefits when Tier II suspensions are made, it would have been awkward to add the phrase "to the maximum extent permissible," since the two phrases would have been redundant, and since the Tier II suspensions have to be spread across "all" -- not merely "some" -- benefits in Tier II (as well as prior to any Tier III benefit suspensions).

Indeed, contrary to Treasury's reasoning, the Supreme Court has recently and repeatedly recognized that "[the] preference for avoiding surplusage constructions is not absolute,"⁶⁶ and it is particularly disfavored in circumstances like these. For one thing, the canon against surplusage is a device for resolving statutory ambiguity, not for disregarding statutory language that is otherwise plain.⁶⁷ Moreover, the canon against surplusage cannot resolve interpretive disputes where neither of the competing constructions give separate effect to every word of a statute.⁶⁸ For instance, a degree of superfluity is preferred when the redundancy is readily explained, and when the competing interpretation would result in the "complete collapse" of an enumerated list.⁶⁹ Finally, the canon is disfavored when a law is passed under circumstances that fail to reflect the "care and deliberation that one might expect of such significant legislation."⁷⁰ Each of these considerations militates against dogmatic use of the canon here: First, the 2016 Proposed Regulation cannot be reconciled with the unambiguous text of the statute. Next, the 2016 Proposed Regulation fails to give significant meaning to the terms "second" and "third," thereby reducing those terms to surplusage (and likewise fails to give effect to the term "all" in clause (II), since it merely protects against discrimination with regard to Tier III benefits and does nothing to implement the mandate that Tier II suspensions apply to "all" Tier II benefits). Finally, despite being a complex and significant change in the law, MPRA was passed just days after its introduction, with limited debate and without a single substantive amendment as part of a much larger bill.⁷¹ In short, not only are there serious flaws in Treasury's statutory analysis here, but the alternative interpretation that Treasury has offered is subject to even more profound questions in those same respects; and, in contrast, reading the statute as a sequencing rule neither creates real surplusage nor rewrites the language used: MPRA used many mutually reinforcing textual features -- including not only the ordinal numbers "first," "second," and "third," but also provisions regarding suspensions "to the maximum extent permissible" (for Tier I) and suspensions for "all other benefits that may be suspended" (for Tier II) -- to make and reinforce the ordering rules. Treasury's effort to find meaningful ambiguity in this language is simply unfounded.

Furthermore, Treasury's attempt to distinguish Code Section 432(e)(9)(D)(vii) from other suspension ordering rules is also misguided. As Treasury itself admits (with understatement), there are "similarities" between Code Section 432(e)(9)(D)(vii) and other ordering rules like ERISA Section 4044.⁷² In fact, these statutes are nearly identical in structure and purpose. All are intended to govern the allocation of assets when a pension plan or other debtor cannot pay all benefits/debts owed, and do so by creating classes of claims that are to be paid (or benefits that are to be suspended) "first," "second," "third," and so on. The only distinction to which Treasury can point is that Code Section 432(e)(9)(D)(vii) lacks the phrase "in the following order."⁷³ But, by definition, ordinal numbers such as "first," "second," and "third" denote a sequential order,⁷⁴ and the phrase "in the following order" merely underscores what is already plain. Indeed, Bankruptcy Code Section 726 also lacks the phrase "in the following order," and yet has still been universally understood to require a strict ordering of asset allocation.⁷⁵ Thus, while the phrase "in the following order" might have provided a rhetorical exclamation point, it is plainly unnecessary to make clear that the "second" tier comes after the "first" one, and the "third" tier comes after the "second" one.

Moreover, Treasury provides no plausible explanation concerning why MPRA would have utilized a "first, second" structure to create an ordering rule as between the first and second Tiers, but not have intended "second, third" to similarly create an ordering rule, as opposed to an anti-discrimination rule, as between the second and third Tiers. Presumably, when it used the same ordered phrasing, MPRA created the same ordered rule to apply to first, second, and third. Treasury also fails to explain why MPRA would have used the extraordinarily elliptical "second" and "third" formulation to create an anti-discrimination rule (as opposed to an ordering rule), rather than simply state that benefits attributable to service with a Tier III employer may be reduced no more than those attributable to service with a Tier II or Tier I employer. Anti-discrimination rules appear throughout the United States Code and the Code of Federal Regulations, and indeed appear frequently in the employee benefits context in particular.⁷⁶ Yet Treasury points to no instance where an anti-discrimination rule has been effectuated through anything remotely similar to the "first," "second," and "third" formulation in Code Section 432(e)(9)(D)(vii), and UPS is unaware of any. The "first, second, third" formulation is the convention for ordering rules, not anti-discrimination rules, and Treasury simply has no precedent or sensible explanation for its contrary proposed construction here.

Indeed, Treasury's proposed approach fails to fulfill Code Section 432(e)(9)(D)(vii)'s purpose. As Treasury accurately perceives, the statutory purpose was to favor participants who worked for Tier III employers -- who not only fully funded those participants' benefits, but also provided backstop protection for them -- and to protect those Tier III participants and their employers from suspensions targeted at back stopped benefits.⁷⁷ However, that statutory goal is fully advanced only by an ordering rule that prevents suspension of any Tier III benefits so long as any Tier II benefits remain lawfully to be suspended. An anti-discrimination rule does not provide the favoritism of Tier III employers (and their participants) that the statute intended; and it still improperly allows biased trustees to "take advantage" of the backstop provisions provided by Tier III employers.⁷⁸

In conclusion, statutes should be read according to their words, to achieve their purposes, and in the context of the background conventions against which they are enacted. Inapplicable canons of construction, and the absence of identical phrasing across statutes, should not be used to suggest ambiguities that are lacking and constructions that are unsupported. That, unfortunately, is what the 2016 Proposed Regulation unlawfully proposes to do. Treasury must therefore withdraw the 2016 Proposed Regulation.

The 2016 Proposed Regulation sets forth its anti-discrimination rule in two sentences. The first sentence states the general rule that a suspension may not provide for a "greater reduction" in Tier III benefits "than the reduction that is applied to benefits described in" another tier.⁷⁹ The second sentence states that this rule is satisfied "if no participant's benefits" attributable to service with a Tier III employer "are reduced more than that participant's benefits would have been reduced if," holding other factors constant, "those benefits were attributable to service with an employer" in another tier.⁸⁰ At a minimum, the 2016 Proposed Regulation thus prohibits suspension applications that on their face discriminate against Tier III benefits. But, as UPS explained in the Supplemental Comment Letter, construed against the backdrop of established anti-discrimination law, the 2016 Proposed Regulation is best read also to prohibit the use of facially neutral suspension criteria that either would produce an unjustified disparate impact on Tier III benefits or were intentionally designed to produce such impacts. However, the statement in the regulatory preamble that the 2016 Proposed Regulation aims to prevent suspensions "expressly designed to take advantage of" Tier III backstop commitments is possible ground for confusion about whether, contrary to the regulation's language and such conventional anti-discrimination principles, the 2016 Proposed Regulation is instead limited only to facial discrimination against Tier III benefits.⁸¹ If so limited, the 2016 Proposed Regulation would be unlawful, as there is simply no lawful justification for so limited an anti- discrimination rule.

To begin, nothing in the language or purpose of Code Section 432(e)(9)(D)(vii) affirmatively suggests such a stingy anti-discrimination rule. Moreover, as explained in the Supplemental Comment Letter, the language of the 2016 Proposed Regulation is framed in terms of effects and, under controlling Supreme Court guidance, must be understood to reach suspension plans with unjustified disparate impacts.⁸²

Furthermore, a rule limited to facial discrimination would be inconsistent with other provisions of ERISA, which are replete with prohibitions on transactions entered into with the purpose of achieving forbidden objectives.⁸³ It also would be inconsistent with Treasury's own interpretations of other anti-discrimination statutes in the employee benefits context, which it consistently has read to prohibit the use of facially neutral criteria with a discriminatory effect. For example, Code Section 105(h) limits tax preferences for self-insured medical plans that discriminate in favor of highly compensated individuals. Treasury has interpreted this rule to mean that "[n]ot only must a plan not discriminate on its face in providing benefits in favor of highly compensated individuals, the plan also must not discriminate in favor of such employees in actual operation."⁸⁴ Similarly, Code Section 401(a)(4) prohibits discrimination in tax-qualified retirement plans, and Treasury tests for such discrimination in both "the form" of the plan and "its effect in operation."⁸⁵ Indeed, Treasury understands this effects-based test to require consideration of "all of the relevant facts and circumstances," including the relative characteristics of different classes of employees.⁸⁶

Looking beyond the text of MPRA, the language of the 2016 Proposed Regulation and other provisions of ERISA and the Code only confirms that Code Section 432(e)(9)(D)(vii) cannot properly be limited to a prohibition on facially discriminatory benefit suspension plans. In a wide range of different areas, anti-discrimination laws have been interpreted to prohibit the use of facially neutral criteria that, in operation, have disproportionately harmful effects on the protected class.⁸⁷ As noted in the Supplemental Comment Letter, just last Term, the Supreme Court held that, when an anti-discrimination law speaks to the effects of an action, the law must be read to prohibit acts having a disparate impact on the protected group.⁸⁸ In addition, even when anti-discrimination laws do not prohibit disparate impact (as is the case, for example, with the Equal Protection Clauses of the Fifth and Fourteenth Amendments), they have always been interpreted to prohibit the use of facially neutral criteria selected with an intent to harm the protected class.⁸⁹ As courts have long recognized, anti-discrimination rules must "nullif[y] sophisticated as well as simple-minded modes of discrimination,"⁹⁰ and such rules "would be of little value if they could be [] indirectly denied."⁹¹ Nothing in the language of Code Section 432(e)(9)(D)(vii) remotely suggests that it creates a more limited anti-discrimination rule than any other area of the law, much less an ineffective one.

Moreover, a conventional approach to anti-discrimination principles is particularly important in this context. Actuaries can and do finely adjust selection criteria to achieve effects precisely foreseen and deliberately intended. Here, for example, the CSPF's actuaries considered precise data on participant demographics, which could be readily exploited to target Tier III benefits without specifically naming any Tier III benefits or any Tier III employer. Such manipulation is only made easier by the fact that Tier III participants are likely to have distinctive characteristics due to their employer's withdrawal from the plan. A rule covering only facial discrimination would offer no protection against such manipulations of suspension criteria, even where (as is the case for the Application) the discriminatory effects are profound and the discriminatory intent undeniable.

The need to protect against superficially neutral manipulations of benefit suspension formulas is even more important in the specific context of MPRA and proposed reductions of Tier III benefits. For suspensions of benefits under a multiemployer plan, the party designing the suspensions -- the trustees of the plan -- labors under significant conflicts of interest. As the Supreme Court explained in Concrete Pipe, plan trustees have substantial incentives, financial and otherwise, to act in a biased manner against employers who have withdrawn from the plan.⁹² Here, for example, the CSPF Trustees are appointed by Tier II employers and the unions representing those active Tier II participants, and every dollar in increased suspensions in Tier III could be a dollar less in suspensions for Tier II. And, because Tier III benefits are backstopped by Tier III employers, trustees obviously would want to concentrate any suspensions on those employers. In short, in this context, protection against mere facial discrimination is no protection at all. Code Section 432(e)(9)(D)(vii) -- which was obviously intended to protect Tier III employers and their participants, as Treasury itself has recognized -- cannot reasonably be construed to have adopted such an entirely ineffectual approach.

The Application graphically illustrates the toothlessness of a non-discrimination rule covering only facial discrimination. As detailed in the Original Comment Letter and the Supplemental Comment Letter, the Application was expressly designed to impose benefit suspensions on the basis of characteristics that applied disproportionately to UPS plan participants, while carefully avoiding almost any explicit reference to UPS or any other individual employers.⁹³ But the Application itself contains critical admissions that the proposed benefit suspensions were purposefully designed with the backstop provisions to which UPS had agreed in mind.⁹⁴ Moreover, the CSPF created a disfavored category of terminated vested participants with fewer than 20 years of credited service, and subjected this category of participants to larger benefit reductions; and, because UPS withdrew from the CSPF nearly ten years ago, most of its Tier III participants (approximately 34,000 of 48,000) do not have twenty years of service with the CSPF, and therefore fall into this disfavored category.⁹⁵ In contrast, only about 20% of Tier II participants fall into this disfavored category.⁹⁶ By targeting this one characteristic largely specific to Tier III participants, the CSPF imposed on them an additional approximately $440 million in benefit suspensions.⁹⁷ Moreover, it did all of this for the avowed purpose of triggering the UPS backstop obligation.⁹⁸ If Code Section 432(e)(9)(D)(vii) is construed not to cover these admitted adverse impacts for that admitted purpose, it will have been construed to defeat, rather than promote, the statute's intent to protect Tier III benefits and the employers that funded and backstopped them.

IV. THE 2016 PROPOSED REGULATION IS IMPERMISSIBLY VAGUE

In all events, the 2016 Proposed Regulation is impermissibly vague. Unless clarified (and republished for further comment), it would also be unlawful under the Due Process Clause and the APA.

The requirements of due process apply with full force in the context of administrative regulation. Indeed, courts "appear to apply a more stringent standard of notice to civil regulations than civil statutes: parties are entitled to have 'ascertainable certainty' of what conduct is legally required by the regulation." ¹⁰⁴ Moreover, the APA independently "requires that an agency's exercise of its statutory authority be reasonable and reasonably explained."¹⁰⁵ "[C]ryptic" explanations that "ha[ve] no content" or "offer[] no meaningful guidance" do not legally suffice.¹⁰⁶

Four cases are illustrative. In Tripoli Rocketry Ass'n, Inc. v. Bureau of Alcohol, Tobacco, Firearms, & Explosives, the agency listed a particular material as an "explosive" under a federalstatute.¹⁰⁷ The agency reasoned that the material deflagrated (which made it an "explosive") rather than burned (which would have made it not an "explosive") because its reaction velocity upon ignition was "much faster" than the reaction achieved through burning.¹⁰⁸ The D.C. Circuit set aside the agency's "much faster" standard because it "sa[id] nothing about what kind of differential makes one burn velocity 'much faster' than another."¹⁰⁹ Without "some metric" for classifying various materials along the spectrum, the court concluded that the agency's determination "lack[ed] any coherence."¹¹⁰

Similarly, in Appalachian Power Co. v. Train, companies challenged EPA regulations that limited suspended solids in rainfall run-off from areas disturbed by construction activity.¹¹¹ The Fourth Circuit concluded that the regulations were "impermissibly vague" because they failed to define what construction activity was covered. The court stated: "It is impossible to determine from the regulations whether the construction, for example, of chemical treatment plants, sewage lines, fuel storage and transportation facilities or other such units are subject to control."¹¹² Accordingly, the court "set aside" the regulations and remanded "with directions that EPA clarify the scope of their applicability."¹¹³

The First Circuit's decision in S. Terminal Corp. v. EPA is similar.¹¹⁴ That case involved an EPA regulation that conditioned construction of parking facilities on the receipt of a "permit stating that construction or modification of such facility will not interfere with the attainment or maintenance of applicable Federal air quality standards."¹¹⁵ The court invalidated the regulation because it "[did] not indicate how 'interference' [was] to be judged, nor [did] it state who [bore] the burden of showing noninterference."¹¹⁶ "The prospective applicant for a permit" thus was left "utterly without guidance as to what he [had to] prove, and how."¹¹⁷

And just last year, in U.S. Postal Serv. v. Postal Regulatory Comm'n, the D.C. Circuit invalidated an agency order that failed to "enunciate an intelligible standard."¹¹⁸ The statute at issue in that case generally forbids the United States Postal Service from raising the rates on certain products faster than the rate of inflation.¹¹⁹ The Postal Regulatory Commission issued an order holding that changes in mail preparation requirements could be counted against the price cap if they resulted in a "change in rates." ¹²⁰ The D.C. Circuit found that the order was "arbitrary and capricious because it fail[ed] to articulate a comprehensible standard for the circumstances in which a change to mail preparation requirements . . . [would] be considered a 'change in rates.'"¹²¹ The court explained:

First, as noted above, the 2016 Proposed Regulation is unclear about whether and to what extent it applies to benefit suspensions that are facially neutral but discriminatory in design and/or effect. The 2016 Proposed Regulation is written in language that applies to discriminatory effects; but the preamble seems to make a confusing reference to only facially discriminatory benefit suspensions. Moreover, although the 2016 Proposed Regulation speaks to discriminatory "application" of benefit suspensions, it could be read to suggest that a facially neutral plan is permitted even if designed for a discriminatory purpose -- contrary to the purpose of Code Section 432(e)(9)(D)(vii) and universally applied anti-discrimination principles. This vagueness ill serves the regulated communities and is contrary to due process and the APA.

Second, the 2016 Proposed Regulation is vague about whether discrimination (whether facial, intentional, or in effect) is to be measured on an aggregate or individualized basis. The second sentence of the proposed rule -- "[t]his requirement is satisfied if no participant's benefits that are directly attributable to service with an employer described in [Tier III] are reduced more than that participant's benefits would have been reduced if, holding the benefit formula, work history, and all relevant factors used to compute benefits constant, those benefits were attributable to service with an employer that is not described in [Tier III]" -- has an individualized focus, as it measures discrimination by reference to the reduction of benefits of any individual "participant."¹²⁶ However, in stating that the regulatory anti-discrimination rule "is satisfied if" no individual participant suffers discrimination, the 2016 Proposed Regulation is silent on whether the absence of discrimination against any individual is a sufficient condition for the proposed suspension plan to be lawful, or simply a necessary one. Compounding this uncertainty, the preamble explicitly solicits comments on whether the alternative anti-discrimination rule under consideration should be framed on an individual-by-individual basis or on an aggregate basis. The 2016 Proposed Regulation fails to explain why only one method of measuring discrimination might be appropriate for the 2016 Proposed Regulation, but not for the alternative formulation.

Third, the 2016 Proposed Regulation does not explain which "benefit formula" must be held constant. Is it the "benefit formula" in the underlying pension plan? Or, is it the "benefit formula" in the proposed suspension plan? The 2016 Proposed Regulation does not distinguish between these two possibilities, yet the difference could be critical. For example, there are four types of retirement benefits under the CSPF, and each type of retirement benefit is calculated based on differing factors set forth in the CSPF.¹²⁷ By contrast, the benefit formula in the suspension plan takes into account factors that are not set forth in the CSPF and that were instead created solely for purposes of the suspension plan, such as "whether the participant is an active participant, a terminated participant, or a retiree as of July 1, 2016."¹²⁸ The 2016 Proposed Regulation does not specify which formula applies and must be held constant in the regulatory test.

Fourth, the 2016 Proposed Regulation is vague about what factors are encompassed within the phrase "all relevant factors used to compute benefits." Again, it is unclear whether the 2016 Proposed Regulation is referring to "all relevant factors" in the underlying pension plan, "all relevant factors" in the proposed suspension plan, or some other set of factors deemed relevant by Treasury. Moreover, it is unclear what additional "factors" might be relevant, especially since the already-listed factors -- "work history" and "benefit formula" (whatever "benefit formula" means) -- likely encompass a number of subsidiary factors.

Fifth, the 2016 Proposed Regulation is vague about whether benefit reductions should be measured on an absolute or percentage basis. The 2016 Proposed Regulation states only that the Tier III benefits of an individual participant cannot be "reduced more" than they would have been had they been benefits provided by an employer in another tier. That formulation seems to suggest an absolute measure, but the 2016 Proposed Regulation does not say so explicitly. Worse, the alternative approach described in the preamble contemplates calculating the reduction "on a percentage basis,"¹²⁹ but fails to explain why that metric was chosen, whether it extends to the regulation actually proposed, or why the primary and alternative proposals should differ in that respect.

Finally, the 2016 Proposed Regulation is vague even about preserving the clear ordering rule as between Tier I and Tier II. On the one hand, the preamble acknowledges that an ordering rule applies as between the first two tiers, and the first sentence of the 2016 Proposed Regulation frames an anti-discrimination rule only as between Tier II benefits and Tier III benefits.¹³⁰ On the other hand, the second sentence of the 2016 Proposed Regulation provides that the regulation "is satisfied" if, holding appropriate factors constant, there is no greater reduction in benefits attributable to service with a Tier III employer than for benefits "attributable to service with an employer that is not described in" Tier III.¹³¹ That formulation could be read to suggest that a lack of discrimination between Tier III benefits and Tier I benefits may be sufficient to comply with the regulation, regardless of whether Tier I benefits have been reduced to the maximum extent permissible. Reinforcing this concern, the preamble states that the alternative proposal would be "satisfied" if benefits "directly attributable to service with" a Tier III employer were reduced less than they would have been reduced if they had been "attributable to service with any other employer."¹³² The 2016 Proposed Regulation therefore clouds the clear statutory language establishing an ordering rule not only as between Tier II and Tier III, but also as between Tier I and Tier II.

Even if one or more of these uncertainties were tolerable in isolation, which they are not, "their sum makes a task . . . which at best could be only guesswork."¹³³ Indeed, the flaws inherent in the 2016 Proposed Regulation are far worse than those in other regulations nevertheless held void for vagueness. For example, like the key terms at issue in each of the four cases discussed above -- "much faster," "construction activity," "interference," and "change in rates" -- the terms in the 2016 Proposed Regulation, including the crucial phrase "greater reduction," are ill-defined. But unlike the regulations at issue in those cases, the 2016 Proposed Regulation here is not only unclear but contradictory, providing conflicting signals as to how the reductions at issue are to be assessed. The 2016 Proposed Regulation offers no meaningful guidance to affected parties; and the Due Process Clause and the APA therefore do not allow it. The 2016 Proposed Regulation must be reformulated from scratch to address these various questions, among others (and then republished for comment).

On the one hand, the alternative approach may be intended to create options with respect to one or more of the open questions addressed above: whether (i) the regulation encompasses discrimination that does not appear on the face of a suspension proposal; (ii) discrimination is measured by reference to individual participants or in the aggregate; (iii) a reduction of benefits is measured on an absolute or percentage basis; and (iv) the ordering rule as between Tier I and Tier II should be respected. However, the preamble does not identify which, if any, of these questions was the basis for considering an alternative approach. And, as shown above, it is unclear whether the 2016 Proposed Regulation actually differs from the alternative approach on any of these specific questions.

On the other hand, the alternative approach may be designed simply to capture the difference between a rule prohibiting a "greater" reduction in Tier III benefits (in the proposed regulation) and a rule requiring a "lesser" reduction in Tier III benefits (in the alternative under consideration).¹³⁴ But it seems strange to publish and solicit comments on an alternative proposal simply to address a one-penny swing about whether reductions in perfect equipoise should fall on one or the other side of the line. Perhaps the alternative approach intends to require more material reductions in Tier II benefits than in Tier III benefits in order to pass scrutiny? But the proposal does not say so, much less provide any guidance about the applicable "lesser" standard or how to measure for it.

Either way, the cryptic and confused presentation of an alternative approach exacerbates the pervasive vagueness of the 2016 Proposed Regulation. As presently formulated, the 2016 Proposed Regulation and the alternative under consideration are both impermissibly vague.

V. CONCLUSION

Treasury should decline to adopt the 2016 Proposed Regulation or the alternative under consideration. Instead it should apply Code Section 432(e)(9)(D)(vii) as written, to effect a suspension ordering rule not only as between Tier I and Tier II, but also as between Tier II and Tier III.

UPS appreciates your consideration of these comments and welcomes the opportunity to further discuss this important matter. Please contact me at (404) 828-7051 if you have any questions.

² MPRA made parallel amendments to the Code and the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). As a result, this same provision also appears in 29 U.S.C. § 1085(e)(9)(D)(vii). For simplicity, UPS cites only to the relevant Code provisions.

³ 81 Fed. Reg. 7253.

⁴ 81 Fed. Reg. 7253, at 7256.

⁵See 26 U.S.C. § 432(e)(9)(A); Original Comment Letter at 4-6.

⁶ 26 U.S.C. § 432(e)(9)(G).

⁷ 26 U.S.C. § 432(e)(9)(G)(i).

⁸ 26 U.S.C. § 432(e)(9)(D)(i)-(iii).

⁹ 26 U.S.C. § 432(e)(9)(D)(iv).

¹⁰ 26 U.S.C. § 432(e)(9)(D)(vi).

¹¹ 26 U.S.C. § 432(e)(9)(D)(vii)(I).

¹² 26 U.S.C. § 432(e)(9)(D)(vii)(II).

¹³ 26 U.S.C. § 432(e)(9)(D)(vii)(III).

¹⁴ Application Item 8.2, page 8.2.37.

¹⁵ Determined as of the "Transfer Date," which was January 1, 2008. These liabilities included restoration of a service pension that had been eliminated by the CSPF.

¹⁶ Application Item 30.2, page 30.2.11. As a result of the withdrawal liability payment and backstop under the UPS/IBT Plan described above, the CSPF is a plan with benefits described in 26 U.S.C. § 432(e)(9)(D)(vii)(III). See Application Item 30, page 30.0.

¹⁷ Certain participants have benefits in more than one tier. Application Item 13.2, page 13.2.1.

¹⁸ Based on a review of the limited data provided by the CSPF, it appears that the present value of the CSPF's proposed cuts in Tier III benefits may in fact be $190 million higher than what the CSPF states. PwC Report, CSPF Suspension Application (Dec. 4, 2015) (attached as Appendix A to Original Comment Letter), page 9.

¹⁹ Application Item 13.2, page 13.2.1.

²⁰ Application Item 2.1, page 2.1.6.

²¹ Application Item 2.1, page 2.1.2.

²² Supplemental Comment Letter at 12 n.53.

²³ Application Item 13.2, page 13.2.3.

²⁴ Original Comment Letter, Appendix A, page 11.

²⁵ Original Comment Letter, Appendix A, page 14.

²⁶ According to the Application, there are 322,560 participants with Tier II benefits. Application Item 13.2, page 13.2.1. However, under the CSPF's proposal, 119,826 (37.15%) CSPF participants with Tier II benefits will receive zero reduction to their benefits. Application Item 13.2, page 13.2.3. This statistic is even more striking for participants with Tier II benefits in the "active, retired, or beneficiary" category with less than 20 years of contributory service. Under the CSPF's proposal, 72,204 (64.62%) of the 111,734 participants in this category will receive zero reduction to their benefits. Application Item 13.2, page 13.2.3. This is primarily because the CSPF proposes to use a formula based on 1.0% of contributions that was meant to free the active pool (the employees and union members of the CSPF Trustees) from the deep cuts imposed on Tier III participants.

²⁷ Original Comment Letter, Appendix A, page 23.

²⁸ 81 Fed. Reg. 7253-01, at 7254.

²⁹Id.

³⁰Id.

³¹Id. at 7256.

³²Id.

³³Id. at 7255.

³⁴Id.

³⁵Id. at 7255-56.

³⁶Id. at 7255.

³⁷ 26 U.S.C. § 432(e)(9)(D)(vii).

³⁸ Even Treasury recognizes the suspension ordering rule as it applies to Tier I. 81 Fed. Reg. 7253, at 7254.

³⁹Trs. of Iron Workers Local 473 Pension Trust v. Allied Prods. Corp., 872 F.2d 208, 213 (7th Cir. 1989)(interpreting "all" to mean 100%, as "there simply is no other way to remain faithful to Congress' intent"); Cent. States Se. & Sw. Areas Pension Fund v. Bellmont Trucking Co., 610 F. Supp. 1505, 1510 (N.D. Ind.1985) aff'd, 788 F.2d 428 (7th Cir. 1986) ("If Congress had said that 'all' contributions to a plan must come from employers primarily engaged in the trucking industry, it would be easy to determine the percentage required: 100%.").

⁴⁰ These limitations are set forth in Code Section 432(e)(9)(D)(i)-(iii).

⁴¹ 29 U.S.C. § 1344(a).

⁴² 29 C.F.R. § 4044.10(d).

⁴³ 46 Fed. Reg. 9480, 9843.

⁴⁴See, e.g., In re Vinnie, 345 B.R. 386, 389-90 (Bankr. M.D. Ala. 2006) (noting that, under Chapter 7, claims are paid in the order of their priority, explaining that "the highest priority claim is paid first[,]" and then "[i]f there are sufficient funds in the estate, the next highest priority claim is paid, and so on, until unsecured claims without priority are paid" until the estate is exhausted, at which time, if "the funds in the estate are not sufficient to pay all claims in full, the last class to receive payment is paid pro rata"); In re Ben Franklin Retail Store Inc., 210 B.R. 315, 316 n.2 (Bankr. N.D. Ill. 1997) (noting that under Bankruptcy Code Section 507(a)(1), administrative expenses are entitled to first priority and that under Section 726(a)(1), distributions are to be made in order of priority established by Section 507 in chapter 7 cases); Matter of Eq. Funding Corp. of Am., 416 F. Supp. 132, 145 (C.D. Cal. 1975) (noting that "absolute priorityrule" requires all corporate debts be paid before shareholders receive anything in bankruptcy and providing an example of the priority system in practice).

⁴⁵ Collier on Bankruptcy ¶ 507.02 (Alan N. Resnick & Henry J. Sommer eds., 16th ed.).

⁴⁶See Official Comm. of Unsecured Creditors v. CIT Grp./Bus. Credit Inc., 787 F.3d 173, 184 (3d Cir. 2015)(discussing the underlying purpose of the absolute priority rule).

⁴⁷ 3 Norton Bankr. L. & Prac. 3d § 49:1, Westlaw (database updated Jan. 2016).

⁴⁸ Code Section 432(e)(9)(D)(i).

⁴⁹ Code Section 432(e)(9)(D)(ii).

⁵⁰ Code Section 432(e)(9)(D)(iii).

⁵¹ Code Section 432(e)(9)(D)(vi).

⁵²Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 447 (1999) (because ERISA is a "comprehensive andreticulated statute," extratextual remedies should not be inferred) (quotation marks omitted).

⁵³ Congressional Research Service, Bill Summary of H.R. 83 (summary as of December 11, 2014), available at http://thomas.loc.gov/cgi-bin/bdquery/z?d113:HR00083:@@@D&summ2=4&.

⁵⁴ John J. Topoleski, Congressional Research Service, Benefit Reductions for Participants in Multiemployer A Defined Benefit (DB) Pension Plans in H.R. 38, the Omnibus Appropriations Act (Dec. 15, 2014) (second emphasis added).

⁵⁵ Staff of Joint Committee on Taxation, Present Law, Data, and Selected Proposals Relating To Multiemployer Defined Benefit Plans, at p. 30 (Feb. 26, 2016).

⁵⁶ 81 Fed. Reg. 7253, at 7254.

⁵⁷Id. at 7556.

⁵⁸ Code Section 432(e)(9)(D)(vii)(II).

⁵⁹ Code Section 432(e)(9)(D)(vii)(III).

⁶⁰ 81 Fed. Reg. 7253, at 7256.

⁶¹Id. at 7254 (emphasis added).

⁶²Id.

⁶³Id.

⁶⁴See Comments on the Application to Reduce Benefits Submitted by Central States, Southeast and Southwest Areas Pension Plan, at 20 n. 34.

⁶⁵Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351, 1364 (2013).

⁶⁶King v. Burwell, 135 S. Ct. 2480, 2492 (2015) (quoting Lamie v. United States Trustee, 540 U.S. 526, 536(2004)). See also Marx v. Gen. Revenue Corp., 133 S. Ct. 1166, 1177 (2013) ("The canon against surplusage is not an absolute rule.").

⁶⁷Lamie v. United States Trustee, 540 U.S. 526, 536 (2004); TMW Enters. v. Fed. Ins. Co., 619 F.3d 574, 578(6th Cir. 2010) ("The canon is one among many tools for dealing with ambiguity, not a tool for creating ambiguity in the first place.").

⁶⁸Marx, 133 S. Ct. at 1177.

⁶⁹Lockhart v. United States, No. 14-8358, 2016 WL 782862, at *2 (Mar. 1, 2016).

⁷⁰King, 135 S. Ct. at 2492.

⁷¹ MPRA was introduced in the House on December 9, 2014, and was signed into law as part of an omnibus appropriations act just seven days later. See Amendment To Rules Committee Print 113-59, available at http://amendments-rules.house.gov/amendments/KLINE129141934463446.pdf; Pension Consolidated And Further Continuing Appropriations Act of 2015, Pub. L. No. 113-235, 128 Stat 2130 (December 16, 2014). There is little evidence of careful consideration in that short time, as the MPRA left committee the day after it was unveiled, and passed the House the day after that. See House Rules Committee, Senate Amendment to H.R. 83, https://rules.house.gov/bill/113/hr-83; Actions Overview H.R. 83 -- 113th Congress (2013-2014), https://www.congress.gov/bill/113th-congress/house-bill/83/actions?q=%7B%22search%22%3A%5B%22%5C%22hr83%5C%22%22%5D%7D&resultIndex=2. Furthermore, the Rules Committee limited House debate on the entire appropriations bill to 80 minutes, and devoted just 20 minutes of that to MPRA. See House Rules Committee, Senate Amendment to H.R. 83, https://rules.house.gov/bill/113/hr-83.

⁷² 81 Fed. Reg. 7253, at 7255.

⁷³Id.

⁷⁴ An "ordinal number" is defined as "a number designating the place (as first, second, or third) occupied by an item in an ordered sequence." Merriam-Webster.com, http://www.merriam-webster.com/dictionary/ordinal%20number.

⁷⁵See, e.g., In re Vinnie, 345 B.R. 386, 389-90 (Bankr. M.D. Ala. 2006); In re Ben Franklin Retail Store Inc.,210 B.R. 315, 316 n.2 (Bankr. N.D. Ill. 1997).

⁷⁶E.g., ERISA Section 510 ("It shall be unlawful for any person to discharge, fine, suspend, expel, discipline,or discriminate against a participant or beneficiary for exercising any right to which he is entitled); Code Section 105(h)(2) ("A self-insured medical reimbursement plan satisfies the requirements of this paragraph only if . . . the benefits provided under the plan do not discriminate in favor of participants who are highly compensated individuals."); Code Section 401(a) (stock bonus, pension, and profit-sharing plans are only "qualified" if "the contributions or benefits provided under the plan do not discriminate in favor of highly compensated employees").

⁷⁷ 81 Fed. Reg. 7253, at 7254.

⁷⁸Id.

⁷⁹ 81 Fed. Reg. 7253, at 7256.

⁸⁰Id.

⁸¹Id. at 7254 (emphasis added). The word "expressly" can mean either explicitly or purposefully, and Treasury has failed to clarify which of these connotations it intended.

⁸² Supplemental Comment Letter at 7-9.

⁸³See, e.g., ERISA Section 4069 ("If a principal purpose of any person in entering into any transaction is to evade liability . . .") (emphasis added); ERISA Section 4212 ("If a principal purpose of any transaction is to evade or avoid liability under this part . . .") (emphasis added).

⁸⁴ 26 C.F.R. § 1.105-11(c)(3)(ii).

⁸⁵ 26 C.F.R. § 1.401(a)(4)-1(a). See also Treasury's 2007 Proposed Regulation 26 C.F.R 1.125-7(k) ("In addition to not discriminating as to either benefit availability or benefit utilization, a cafeteria plan must not discriminate in favor of highly compensated participants in actual operation") (interpreting the non-discrimination rule of Code Section 125).

⁸⁶ 26 C.F.R. § 1.401(a)(4)-5(a)(2) (testing for discrimination in favor of highly compensated employees in the context of plan amendments and plan terminations.)

⁸⁷Tex. Dep't of Hous. & Cmty. Affairs v. Inclusive Cmtys. Project, Inc., 135 S. Ct. 2507, 2518 (2015)(recognizing disparate impact claims under Fair Housing Act); Smith v. City of Jackson, 544 U.S. 228, 232 (2005) (same under ADEA); Griggs v. Duke Power Co., 401 U.S. 424, 432 (1971) (same under Title VII).

⁸⁸Tex. Dept. of Hous. & Cmty. Affairs, 135 S. Ct. at 2518.

⁸⁹See, e.g., Vill. of Arlington Heights v. Metro. Hous. Dev. Corp., 429 U.S. 252, 265-66 (1977); Yick Wo v. Hopkins, 118 U.S. 356, 373-74 (1886) (holding that a law, though "fair on its face, and impartial inappearance," may still be unlawful if administered with discriminatory intent).

⁹⁰See Lane v. Wilson, 307 U.S. 268, 275 (1939).

⁹¹Smith v. Allwright, 321 U.S. 649, 664 (1944).

⁹²See Concrete Pipe and Prods. of Cal., Inc. v. Constr. Laborers Pension Trust for S. Cal., 508 U.S. 602, 617(1993).

⁹³ Original Comment Letter at 24-25; Supplemental Letter at 9-13.

⁹⁴ Application Item 13.1, page 13.1.5; Application Item 8.2, page 8.2.68; see also id. at 8.2.108 (being advised by actuarial consultants on potential distinctions between Tier II and Tier III benefits).

⁹⁵See Application Item 13.2, page 13.2.1.

⁹⁶Id.

⁹⁷ Supplemental Comment Letter at 3, 8, 12.

⁹⁸ Application Item 13.1, page 13.1.5; Application Item 8.2, page 8.2.68

⁹⁹ 81 Fed. Reg. 7253, at 7255.

¹⁰⁰FCC v. Fox Television Stations, Inc., 132 S. Ct. 2307, 2317 (2012). See also Papachristou v. City of Jacksonville, 405 U.S. 156, 162 (1972) ("Living under a rule of law entails various suppositions, one of which is that all persons are entitled to be informed as to what the State commands or forbids.") (quotation marks and alterations omitted).

¹⁰¹Fox Television, 132 S. Ct. at 2317.

¹⁰²Id. (quotation marks omitted); see also Connally v. Gen. Constr. Co., 269 U.S. 385, 391 (1926) ("[A]statute which either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application violates the first essential of due process of law.").

¹⁰³Johnson v. United States, 135 S. Ct. 2551, 2560-61 (2015).

¹⁰⁴FTC v. Wyndham Worldwide Corp., 799 F.3d 236, 251 (3d Cir. 2015); see also Nat'l Oilseed Processors Ass'n v. Occupational Safety & Health Admin., 769 F.3d 1173, 1183 (D.C. Cir. 2014) ("If, by reviewingthe regulations and other public statements issued by the agency, a regulated party acting in good faith would be able to identify, with 'ascertainable certainty,' the standards with which the agency expects parties to conform, then the agency has fairly notified a petitioner of the agency's interpretation.") (quotation marks omitted).

¹⁰⁵Mfrs. Ry. Co. v. Surface Transp. Bd., 676 F.3d 1094, 1096 (D.C. Cir. 2012).

¹⁰⁶USPS v. Postal Regulatory Comm'n, 785 F.3d 740, 754 (D.C. Cir. 2015); see also, e.g., U.S. Telecom Ass'n v. FCC, 359 F.3d 554, 572 (D.C. Cir. 2004) (expressing disapproval of the FCC's definition of"impairment," which was "vague almost to the point of being empty").

¹⁰⁷ 437 F.3d 75, 76 (D.C. Cir. 2006).

¹⁰⁸Id. at 79.

¹⁰⁹Id. at 81.

¹¹⁰Id. at 77, 81.

¹¹¹ 545 F.2d 1351, 1372-73 (4th Cir. 1976).

¹¹²Id.

¹¹³Id. at 1374.

¹¹⁴ 504 F.2d 646 (1st Cir. 1974).

¹¹⁵Id. at 657 n. 8 (quoting 40 C.F.R. § 52.1135(d) (1974)).

¹¹⁶Id. at 670.

¹¹⁷Id. See also id. (observing that the regulation was so "vague" and "standard less" that it "invite[d] arbitrary and unequal application.").

¹¹⁸ 785 F.3d 740, 744 (D.C. Cir. 2015).

¹¹⁹Id. at 743.

¹²⁰Id.

¹²¹Id. at 753.

¹²²Id. at 754.

¹²³Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 525 (1994) (Thomas, J., dissenting) (quoting Pauley v. Beth Energy Mines, Inc., 501 U.S. 680, 696 (1991)).

¹²⁴ Additional Limitation on Suspension of Benefits Applicable to Certain Pension Plans Under the Multiemployer Pension Reform Act of 2014, 81 Fed. Reg. 7253, 7256 (proposed Feb. 9, 2016) (to be codified at 26 C.F.R. pt. 1).

¹²⁵Id.

¹²⁶ 81 Fed. Reg. at 7256.

¹²⁷See, e.g., Guide To Your Pension Plan, Summary Plan Description of the Central States, Southeast and Southwest Areas Pension Plan, available at https://mycentralstatespension.org/media/9794/pl_pen_spd_01-14.pdf.

¹²⁸ Central States Pension Plan Application for Benefit Suspension, at 2.1.1, available at https://www.treasury.gov/services/AppsExtended/(Checklist%202)%20Description%20of%20Suspension.pdf.

¹²⁹ 81 Fed. Reg. at 7255.

¹³⁰ 81 Fed. Reg. at 7254, 7256.

¹³¹Id. at 7256.

¹³²Id. at 7255 (emphasis added).

¹³³Johnson, 135 S. Ct. at 2560.

¹³⁴See 81 Fed. Reg. at 7255 ("[I]n contrast to the approach described in these proposed regulations, the alternative would require that any such suspension of benefits be applied to provide for a lesser reduction in benefits that are directly attributable to service with a [Tier III] employer than to benefits that are attributable to any other service.") (emphasis in original).