PLR 200317052: Pension plan minimum funding waiver denied

Plain-English summary

A company requested a waiver of its defined benefit pension plan's minimum funding standard for a plan year ending in 2001. The IRS denied the request because the company did not show that its hardship was temporary. The letter notes that the company's shares had stopped trading on NASDAQ, it had filed for Chapter 11 bankruptcy, and the Pension Benefit Guaranty Corporation had begun procedures to terminate the plan. It also says a conditional waiver for an earlier plan year became void after the plan failed to meet a later funding standard.

Ruling snapshot

• Question: Did the company qualify for a waiver of its pension plan's minimum funding standard?
• Outcome: Denied; the company did not establish that its hardship was temporary.
• Key authorities: IRC § 412 (minimum funding waiver); the letter cites its UILC 0412.06-00.

Full text (IRS public release)

Significant Index No. 0412.06-00
200317052

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

TAX EXEMPT AND

GOVERNMENT ENTITIES
DIVISION

January 31, 2003

In re:
Company =

This letter constitutes notice that with respect to the above-named defined benefit pension plan, your request for a waiver of the minimum funding standard for the plan year ended July 31, 2001, has been denied. Please also note that, because the minimum funding standard for the plan year ended July 30, 2001, was not satisfied,

the conditional waiver for the plan year ended July 30, 2000, previously granted by letter dated February 27, 2001, is now retroactively null and void.

The information furnished indicates that the Company is a

whose shares once traded on the NASDAQ National Market System. However, trading of the Company’s shares has been suspended by NASDAQ and the Company has filed for bankruptcy under Chapter 11. It is also our understanding that the Pension Benefit Guaranty Corporation (PBGC) has instituted procedures to terminate the plan.

The information furnished failed to demonstrate that the hardship was temporary, and a denial of the request was proposed. You were informed, by telephone call of December 16, 2002, of our tentative denial and were offered a conference of right. You, by telephone call of December 18, 2002, declined our offer of a conference of right. Therefore, our tentative denial is now final.

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.

A copy of this letter is also being sent to the Manager, Employee Plans Classification in 200317052

2

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

Sincerely yours,

Carol D. Gold, Director
Employee Plans