PLR 200445043: Pension plan granted minimum funding waiver after sales decline

Plain-English summary

The IRS granted a minimum funding waiver for a defined benefit pension plan for a plan year ending January 31. The company reported declining sales and reductions in salary and hourly payroll costs, while saying it had recently returned to a profit. The waived amount was the contribution otherwise needed to reduce the plan's funding standard account balance to zero at year end. The IRS warned that increases in benefits or changes to accrual or vesting while the waived deficiency remained unamortized could have consequences under section 412(f) and ERISA. The year and asset-to-liability percentage were redacted.

Ruling snapshot

• Question: Would the plan receive a waiver of its minimum funding standard for the stated plan year?
• Outcome: Approved: the waiver was granted.
• 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
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

200445043

AUG 10 2004

SE.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 January 31,

This waiver for the plan year ended January 31, 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 sales have steadily declined from to The Company has reduced salary costs, and reduced hourly payroll costs. The company has also received a certification that will allow it to be more competitive. The company has started to show signs of recovery by posting a profit for the last three months.

As of February 1, , the value of the assets of the plan was equal to % 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.

200445043

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 January 31, , 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

Sincerely,

[signature]

Norman Greenberg
Manager, Actuarial Group 1