PLR 200740016: IRS revised conditions on a pension funding waiver

Plain-English summary

A company in bankruptcy asked the IRS to change two conditions of an earlier, conditional waiver of its pension plan's minimum funding standard. The company had reached an agreement with a union but expected to need more time for its reorganization. The IRS approved the modification, replacing the deadlines for filing a reorganization plan and for that plan to take effect. The revised filing condition required the plan to continue the pension plan and comply with the waiver's conditions. The letter also warned that increasing retirement benefits or creating another plan while the waived funding deficiency remained unamortized could trigger consequences under section 412(f).

Ruling snapshot

• Question: Could the company revise two deadlines in its conditional pension funding waiver?
• Outcome: Yes; the IRS replaced conditions (1) and (8) of the earlier waiver.
• 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

JUL 13 2007
T:EP:RA:A2
Number: 200740016
Release Date: 10/5/2007

Re:

Company =
Former Parent =

Dear

This letter constitutes notice that the Company's request for a modification of the conditional waiver of the minimum funding standard for the Plan for the plan year ending September 30, , that was granted in a ruling letter dated May 1, 2007, has been approved. Accordingly, conditions (1) and (8) of the funding waiver are replaced with the following conditions:

(1) No later than , the Company files a plan of reorganization with the bankruptcy court providing for continuation of the Plan and compliance with the conditions of this waiver.

(8) The effective date of the Company's plan of reorganization is no later than

This conditional waiver has been granted in accordance with section 412(d) of the Internal Revenue Code (“Code”) and section 303 of the Employee Retirement Income Security Act of 1974 (“ERISA”). The amount for which this conditional waiver has been granted is equal to the contributions that would otherwise be required to reduce the balance in the funding standard account to zero as of September 30,

Based on information submitted by the Company, he Company has reached agreement with the one of the unions representing certain of its employees concerning a contract that will allow the Company to exit bankruptcy. However, it is now anticipated that additional time is needed to work out a plan or reorganization due to competition between capital funds.

200740016

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 a profit sharing plan or any other retirement plans (covering employees covered by the Plan) maintained by the Company, 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. Similarly, the establishment of a new profit sharing plan or any other retirement plan by the Company (covering employees covered by the Plan) would be considered an amendment for purposes of section 412(f) of the Code and section 304(b) of ERISA.

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 ending September 30, , the date of this letter should be entered on Schedule B (Actuarial Information). For this reason, we suggest that you furnish a copy of this letter to the enrolled actuary who is responsible for the completion of the Schedule B. :

We have sent a copy of this letter to the ;
to the - _ 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,

Joseph H. Grant, Director
Employee Plans