PLR 200434024: Pension plan minimum funding waiver denied

Plain-English summary

A company asked the IRS to waive the minimum funding standard for its defined benefit pension plan. The company had filed for Chapter 11 bankruptcy protection, closed, and sold its assets. The Pension Benefit Guaranty Corporation had begun the process of terminating and taking over the plan. The IRS denied the waiver because the information did not show that the hardship was temporary. It also said a previously granted conditional waiver for an earlier plan year was retroactively void because that year's funding standard had not been met.

Ruling snapshot

• Question: Should the plan receive a minimum funding waiver despite the company's financial hardship?
• Outcome: Denied; the earlier conditional waiver also became void.
• Key authorities: IRC § 412.

Full text (IRS public release)

Significant Index No. 0412.06-00

200434024

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

MAY 25 2004

In re:

Company =
Dear

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 , has been denied. Please also note that, because the minimum funding standard for the plan year ended , was not

satisfied, the conditional waiver for the plan year ended , previously granted by letter dated April 23, 2002, is now retroactively null and void.

The information furnished indicates that the Company filed for Chapter 11 bankruptcy protection in and has since shuttered its doors and sold its assets. In addition, the Pension Benefit Guaranty Corporation has issued a Notice of Determination for the purpose of terminating and trusteeing the Plan.

The information furnished failed to demonstrate that the hardship was temporary, and a denial of the request was proposed. Your authorized representative was informed, by telephone call of April 20, 2004, of our tentative denial and was offered a conference of right. Your authorized representative, by telephone call of May 13, 2004, 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
. A copy of this letter is also being furnished to your authorized representative pursuant to a power of attorney (Form 2848) on file.

200434024

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

Sincerely yours,

Carol D. Gold, Director
Employee Plans