PLR 200340027: Pension plan receives conditional funding waiver

Plain-English summary

The IRS granted a conditional minimum funding waiver for a pension plan's year ending April 30, 2003. The company had experienced temporary substantial business hardship, including income losses and increased capital needs as the commercial printing equipment industry changed. It reported a divestiture and moved to a more efficient facility. The IRS found that applying the minimum funding standard would be adverse to plan participants in the aggregate. The waiver required the company to make specified future contributions, including a waiver amortization payment, by a date redacted in the public release. Failure to meet the condition would make the waiver retroactively void.

Ruling snapshot

• Question: Could the plan receive a waiver of its minimum funding standard for the year ending April 30, 2003?
• Outcome: Approved conditionally; future contributions were required by a redacted deadline.
• Key authorities: IRC § 412(d), (f); ERISA §§ 303 and 304.

Full text (IRS public release)

Significant Index No. 0412.06-00

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224 200340027

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JUL 10 2003

In re:

Dear

This letter constitutes notice that a conditional waiver of the minimum funding standard has been granted for the above-named pension plan for the plan year ending April 30, 2003.

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

The (the “Company”) has experienced temporary
substantial business hardship as evidenced by losses in income in of the excluding a . The Company’s financial situation was further impacted by a lack of sufficient equity at a time when the commercial printing equipment industry began experiencing a change in both product evolution and technology that generally required increased capital investments.

In an effort to recover from this hardship, the Company has divested itself of certain and has relocated to a more efficient facility. These actions have significantly reduced the Company’s breakeven point. Benefit accruals under the Plan have been frozen since

The actuarial value of assets as of was , and current liabilities were , with a funding ratio of

2 200340027

It has been determined that an application of the minimum funding standard would be adverse to the interests of plan participants in the aggregate. Accordingly, this waiver has been granted subject to the following condition, which you have agreed to:

The Company will make contributions necessary to satisfy the minimum funding requirement (including the waiver amortization payment for the plan year ended
) of the Plan for the plan year ending by

If the Company fails to meet the above condition, this waiver is retroactively null and void.

Your attention is called to section 412(f) of the Code and section 304 of ERISA which describes the consequences which result in the event the plan is amended to increase benefits, to change the rate in the accrual of benefits, or to change the rate of vesting while any portion of the waived amount remains unamortized.

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

When filing Form 5500 for the plan year ending April 30, 2003, the date of this letter should be entered on Schedule B (Actuarial Information). We have sent a copy of this letter to the . A copy of this letter should be sent to the enrolled actuary servicing the Plan.

If you have any questions concerning this matter, please contact

Sincerely,

Martin L. Pippins, Manager
Employee Plans Actuarial Group 2