PLR 200603039: Pension funding waiver denied after continuing business losses

Plain-English summary

A printing and mailing company requested a waiver of its pension plan's minimum funding standard. Its sales had declined and it had reported losses while facing lower prices from larger competitors. The IRS concluded that the company's hardship did not appear temporary and tentatively denied the request. It offered a conference for the company to provide more information, but the company did not schedule one by the stated deadline. The IRS therefore denied the waiver.

Ruling snapshot

• Question: Would the company receive a minimum funding waiver for its pension plan?
• Outcome: Denied because the hardship did not appear temporary and no conference was scheduled.
• Key authorities: IRC § 412.

Full text (IRS public release)

Significant Index No. 0412.06-00

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

200603039

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

OCT 26 2005

In re:

Company =

This letter constitutes notice that your request for a waiver of the minimum funding standard for the above-named plan for the plan year ending , has been denied.

The Company provides services such as commercial insert printing, mailing, market services and design. The current financial hardship was brought on by competition from larger printers. These larger printers, in the past, did not bid on the size of accounts that the Company services. However, the Company is now in direct competition with the larger printers and is unable to compete with the larger printers lower pricing levels.
Sales from the Company have declined each year from to . The Company
has had a loss in each of those years as well.

Because the business hardship being experienced by the Company does not appear to be temporary, you were notified in a letter dated September 15, , that your request had been tentatively denied, and you were offered the opportunity of a conference of right to review this decision and to present additional information that you believe the Service should take into account before finalizing this ruling. You were also informed that if this conference did not take place by October 6, , your request for a waiver of the minimum funding standard for the plan year ending would be denied, and a ruling letter to that effect would be issued. You have not contacted this office to schedule a conference. Hence, your request for a waiver of the minimum funding standard for the plan year ending , has been denied.

200603039

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.

We have sent a copy of this letter to the Manager, EP Classification in , to the Manager, EP Compliance Unit in , and to your authorized representative pursuant to a power of attorney on file in this office

If you require further assistance in this matter, please contact
.

Sincerely yours,

Donna M. Prestia, Manager
Employee Plans Actuarial Group 2