PLR 200325006: Pension plan receives a 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 sponsoring company's revenue had declined for several years, and the plan's assets equaled 82 percent of its current liability at the start of 2001. The waived amount is the contribution otherwise needed to bring the plan's funding standard account balance to zero at year end. The letter warns that benefit increases or changes to other company retirement plans while the deficiency remains unamortized can have consequences under section 412(f) and ERISA.

Ruling snapshot

• Question: Would the plan receive a waiver of its 2001 minimum funding requirement?
• Outcome: Approved.
• Key authorities: IRC §§ 412(d), 412(f); ERISA §§ 303, 304(b).

Full text (IRS public release)

Significant Index No. 0412.06-00

200325006

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

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION
MAR 28 2003
T:EP:RA:T:A1
In re:
Dear

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’s revenues have steadily declined from 1998 to 2001. The Company is producing a new product, and the market for its other products has improved.

As of January 1, 2001, the value of the assets of the plan was equal to 82% 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.

200325006

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

A copy of this letter should be furnished to the enrolled actuary for the plan.

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

Sincerely,

Norman Greenberg
Acting Manager, Actuarial Group 1