PLR 200751030: Two pension funding waiver conditions removed after asset sale

Plain-English summary

A company asked to modify a conditional pension funding waiver granted in a 2005 ruling. A third party had acquired substantially all its assets and contributed enough to the pension plan to fund it on an ongoing basis. The IRS approved removing the waiver's first two conditions. The letter also says an accumulated funding deficiency was reported and tells the company to file Form 5330 and pay the related excise tax under section 4971(a). The IRS reminds the company of restrictions on increasing retirement plan benefits while a waived funding deficiency remains unamortized.

Ruling snapshot

• Question: Can conditions (1) and (2) be removed from the earlier minimum funding waiver?
• Outcome: Approved; the two conditions were removed.
• Key authorities: IRC §§ 412(d), 412(f), 4971(a); ERISA §§ 303, 304(b).

Full text (IRS public release)

Significant Index No. 0412.06-00
200751030
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224
TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION
SEP 2 8 2007
[illegible]

In re:
Company =
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

December 31, , that was granted in a ruling letter dated September 8, 2005, has been approved. Accordingly, conditions (1) and (2) of the funding waiver have been removed.

This 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 waiver has been granted is the contribution that would otherwise be required to reduce the balance in the funding standard account to zero as of December 31, 2004.

Based on information submitted by the Company, the Company entered into an asset purchase agreement on September 11, , Pursuant to this agreement, substantially all the assets of the Company were acquired by a third party. As required by the asset purchase agreement, the buyer of the Company made a contribution to the Plan in the amount of $ to fully fund the Plan on an ongoing basis.

According to information provided with the request, an accumulated funding deficiency was reported for the Plan for the plan year ending December 31, . Form 5330 should be filed to report the accumulated funding deficiency and to pay the excise tax under section 4971(a) of the Code.

200751030
2

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.

We have sent a copy of this letter to the
and to your

authorized representative pursuant to a power of attorney on file in this office. We suggest that you furnish a copy of this letter to the enrolled actuary who is responsible for the completion of the Schedule B.

If you require further assistance in this matter, please contact

Sincerely yours,

Donna M. Prestia, Manager
Employee Plans Actuarial Group 2