PLR 200807024: IRS modifies conditions on pension funding waiver

Plain-English summary

A company had received a conditional waiver of its pension plan's minimum funding standard. It missed one required contribution by two days because of an oversight and asked the IRS to modify the waiver conditions. The IRS replaced the original conditions with a detailed schedule of collateral, contributions, and proof of payment, including rules for possible changes in waiver amortization. The company agreed to the new conditions. The letter states that failure to satisfy any one of them would make the waiver retroactively void.

Ruling snapshot

• Question: Would the IRS modify the conditions of an existing minimum funding waiver after a late contribution?
• Outcome: Approved, subject to the replacement conditions; failure makes the waiver retroactively void.
• Key authorities: IRC §§ 412(n), 430(f), 404.

Full text (IRS public release)

Significant Index No. 0412.06-00

200807024

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

NOV 21 2007

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

[illegible]

Re:

Company =

Dear

This letter constitutes notice that the conditional waiver of the minimum funding standard for the above-named Plan for the plan year ending December 31, , which was granted in our ruling letter dated July 11, 2007, has been modified by replacing the conditions in the July 11, 2007, letter with the following conditions:

(1) Collateral acceptable to the PBGC be provided to the Plan for the full amount of the waiver, plus the amount of the lien that can be imposed on the Company under section 412(n) of the Internal Revenue Code (“Code”), by the later of (a) 30 days from the date of this ruling letter or (b) the earlier of (i) the date the PBGC notifies the Service in writing that this condition has not been met or (ii) 360 days from July 11, 2007, the date of the original ruling letter.

(2) The Company makes a contribution in the amount of $ to the Plan by December 15, 2007.

(3) The Company makes monthly contributions in the amount of $ to the Plan, by each of the following dates: January 15, 2008, February 15, 2008, March 15, 2008, April 15, 2008, May 15, 2008, June 15, 2008, July 15, 2008, August 15, 2008, and September 15, 2008.

(4) The Company makes monthly contributions in the amount of $ to the Plan, by each of the following dates: October 15, 2008, November 15, 2008, and December 15, 2008.

(5) The Company makes monthly contributions in the amount of $ to the Plan, by each of the following dates: January 15, 2009, February 15, 2009, and March 15, 2009.

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(6) The Company makes monthly contributions in the amount of $ to the Plan, by each of the following dates: April 15, 2009, May 15, 2009, June 15, 2009, July 15, 2009, August 15, 2009, and September 15, 2009.

(7) The Company makes contributions to the Plan in amounts sufficient to meet the minimum funding standard for the Plan for each of the plan years ending December 31, , through December 31, , by September 15, , through September 15, , respectively.

(8) If the Service determines that funding waivers granted with respect to plan years beginning before the first plan year beginning on or after January 1, , are not carried over as a separate amortization base for post- plan years, the Company will make annual contributions to the Plan for each of the plan years beginning January 1, , through , in excess of the minimum required contribution (as described below), and the Company will:

(a) elect (pursuant to section 430(f)(6)(B)(i) of the Code and section 303(f)(6)(B)(i) of ERISA) to increase the prefunding balance for the plan for the plan year beginning January 1, , and by the amount of such excess,

(b) maintain a prefunding balance for the plan years beginning January 1, , and , that is at least equal to the accumulated amount of such excess contributions, and

(c) elect (pursuant to section 430(f)(5)(A) of the Code and section 303(f)(5)(A) of ERISA) to reduce its prefunding balance for the plan year beginning January 1, , by the accumulated amount of such excess contributions. The amount of each annual contribution in excess of the minimum required contribution for the plan years beginning January 1, , through , will be the amount that is the excess of:

(i) the 5-year amortization amount of the , , and funding waivers based on the law prior to PPA, over

(ii) the amount that would be needed to amortize the unamortized balance of the , , and funding waivers as of January 1, , over 7 years.

For purposes of (c)(ii) above, the unamortized balance of the funding waivers as of January 1, , and the 7-year amortization amount will both be determined using the segment rates (as defined in section 430(h)(2)(C) of the Code and section 303(h)(2)(C) of ERISA) in effect for the plan year beginning January 1, .

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(9) The Company provides proof of payment of all contributions described above within 30 days from the date of the contribution to. _ : of this office, by facsimile at or to the following address:

(10) Under no circumstances will the Company be required to make contributions for any plan year totaling more than the amount deductible under section 404 of the Code for that plan year.

You agreed to these conditions in facsimile dated November 20, 2007. If any one of these conditions is not satisfied, the waiver is retroactively null and void.

As a condition of the ruling letter dated July 11, 2007, the Company was required to make a contribution to meet the minimum funding standard for the plan year ending December 31, , by September 15, 2007. According to the information submitted with the request, the Company did not make this contribution until September 17, 2007, as a result of an oversight, thus necessitating the current request for a modification.

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 _ ;
; 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,

Michael D. [illegible]
Director, Employee Plans