PLR 200315037: Pension plan receives minimum funding waiver for 2001

Plain-English summary

The IRS granted a defined benefit pension plan a waiver of its minimum funding standard for the plan year ended December 31, 2001. The company had experienced declining sales and reduced staffing, while the plan's assets were reported at 71 percent of current liability at the start of that year. The waived amount was the contribution otherwise needed to bring the funding standard account to zero. The letter also warns that benefit, accrual, or vesting increases while the deficiency remains unamortized can have consequences under tax and pension law.

Ruling snapshot

• Question: Would the IRS waive the plan's minimum funding requirement for 2001?
• Outcome: Approved: minimum funding waiver granted for the 2001 plan year.
• Key authorities: IRC §§ 412(d), 412(f); ERISA §§ 303, 304(b).

Full text (IRS public release)

Significant Index No. 0412.06-00

200315037

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND

GOVERNMENT ENTITIES
DIVISION

JAN 15 2003

In re:

This letter constitutes notice that with respect to the above-named defined benefit pension plan we have granted a waiver of the minimum funding standard for the plan year ended December 31, 2001.

This waiver for the plan year ended December 31, 2001, has been granted in accordance with section 412(d) of the Internal Revenue Code and section 303 of the Employee Retirement Income Security Act of 1974 (ERISA). The waived amount is the contribution which would otherwise be required to reduce the balance in the funding standard account to zero as of the end of the plan year for which this waiver has been granted.

The company has a calendar year fiscal year. The Company sales have steadily declined from 1998 to 2001. The Company has reduced staff, and has received orders from new customers.

As of January 1, 2001, the value of the assets of the plan was equal to 71% of the plan's current liability.

Your attention is called to section 412(f) of the Code and section 304(b) of ERISA which describe the consequences that would result in the event the plan is amended to increase benefits, change the rate in the accrual of benefits or to change the rate of vesting, while any portion of the waived funding deficiency remains unamortized. Please note that any amendment to other retirement plans maintained by the company or to the company’s profit sharing plan, to increase the liabilities of those plans would be considered an amendment for purposes of section 412(f) of the Code and section 304(b) of ERISA.

200315037

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited by others as precedent.

When filing Form 5500 for the plan year ended December 31, 2001, the date of this letter should be entered on Schedule B (Actuarial Information). A copy of this letter is being sent to the Manager, Employee Plans Classification in

If you have any questions on this ruling letter, please contact.

Sincerely,

Norman Greenberg /
Acting Manager, Actuarial Group 1

cc: Manager, Employee Plans Classification