PLR 200510038: IRS waives a pension plan's minimum funding requirement

Plain-English summary

A company sought a waiver of the minimum funding requirement for its defined benefit pension plan. It reported falling sales, higher costs, and efforts to cut costs and find new markets. The IRS granted a waiver under Code § 412(d) for a plan year whose ending date is redacted in the public letter. The waived amount is the contribution that otherwise would have eliminated the plan's funding account deficit for that year. The IRS warned that amendments increasing benefits or liabilities in this plan or the company's other retirement plans could have consequences while the waived deficit remains unamortized.

Ruling snapshot

• Question: Could the plan receive a waiver of its minimum funding requirement for the redacted plan year?
• Outcome: Approved.
• 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

200510038

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

DEC 17 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 [illegible].

This waiver for the plan year ended [illegible] 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 fiscal year ending on the last day in February. The Company has experienced a decline in sales volume and a rise in costs. The company is taking extreme cost cutting measures as well as exploring for new markets.

As of [illegible] the value of the assets of the plan was equal to [illegible]% 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.

200510038

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 [illegible], 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