PLR 200419034: Pension plan receives 2002 minimum funding waiver

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, 2002, under IRC § 412(d). The employer had losses in 1999 through 2001, cut costs, and reported positive earnings in 2002. At the start of 2002, plan assets were 55% of current liabilities. The waiver covers the contribution otherwise needed to bring the plan's funding standard account to zero for that year. The letter warns that amendments increasing benefits or other plan liabilities may have consequences while the waived deficiency remains unamortized.

Ruling snapshot

• Question: Will the IRS waive the pension plan's minimum funding standard for its 2002 plan year?
• Outcome: Approved: waiver granted for the plan year ended December 31, 2002.
• Key authorities: IRC §§ 412(d), 412(f); ERISA §§ 303, 304(b).

Full text (IRS public release)

Significant Index No. 0412.06-00

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE

200419034

WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION

FEB 09 2004

[illegible]

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, 2002.

This waiver for the plan year ended December 31, 2002, 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 had negative earnings in 1999, 2000 and 2001. The Company has taken measures to cut cost, including reduction of administrative expenses, reduction of salaries, and layoffs. The company is also aggressively acquiring new business, and has received several new contracts. This has resulted in positive earnings for 2002.

As of January 1, 2002, the value of the assets of the plan was equal to 55% 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.

200419034

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, 2002, 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
Manager, Actuarial Group 1