PLR 200501024: Defined benefit plan receives minimum funding waiver

Plain-English summary

A nonprofit corporation received a waiver of the minimum funding standard for its defined benefit pension plan for the plan year ended December 31, 2003. The corporation reported falling revenue and working capital, and the plan's assets were 58 percent of its current liability at the stated measurement date. The IRS granted the waiver under § 412(d) for the contribution needed to bring the plan's funding standard account balance to zero. It warned that benefit or vesting increases while the waived deficiency remained unamortized could trigger consequences under § 412(f).

Ruling snapshot

• Question: Would the IRS waive the plan's minimum funding standard for the 2003 plan year?
• Outcome: Approved: waiver of the specified required contribution.
• Key authorities: IRC §§ 412(d), 412(f); ERISA §§ 303, 304(b).

Full text (IRS public release)

Significant Index No. 0412.06-00
200501024

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

OCT 14 2004

[illegible]

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, 2003.

This waiver for the plan year ended December 31, 2003 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 is a 501(c) corporation serving the metro [redacted] area. The Company provides numerous community programs which include services to the aged such as person care and other assisted living services, counseling and social work intervention. Revenue has significantly been reduced from the [redacted] year end to the [redacted] year end. Working capital has also decreased during that same period. On June 1, [redacted], The Company became eligible for Medicare funding. The Company is the sole provider of services that are mandated by family court under a new program. As of January 1, [redacted], the value of the assets of the plan was equal to 58% 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.

200501024

2

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, [redacted], 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