PLR 200822042: Pension funding waiver denied despite employer hardship

Plain-English summary

A multiemployer construction pension plan requested a waiver of its minimum funding standard. Most of its former contributing contractors had left the union's jurisdiction, leaving three small contractors responsible for the plan's retiree burden. The IRS acknowledged that the remaining employers faced substantial business hardship. It denied the waiver because they would still be unable to make payments sufficient to cover both amortization of the waiver and the plan's future costs. The agency found it unreasonable to assume that granting a waiver would allow the plan to continue.

Ruling snapshot

• Question: Could the plan receive a minimum funding waiver for a year whose date was redacted?
• Outcome: Denied because the remaining employers could not satisfy future funding requirements.
• Key authorities: IRC § 412 (minimum funding waiver).

Full text (IRS public release)

Significant Index No. 0412.06-00 200822042

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

TAX EXEMPT AND

GOVERNMENT ENTITIES
DIVISION

MAR 06 2008

Re:

Union =

This letter is to inform you that your request for a waiver of the minimum funding standard for the above-named plan for the plan year ending December 31 , has been denied.

The Plan's contributing employers are engaged in the

construction industry. At one time, over 15 national contractors contributed to the Plan on behalf of over 180 participants. Many of these contractors ceased operations in the jurisdiction of the Union and were not required to pay any withdrawal liability. The three remaining small local contractors were left with the liability created primarily by the departed national contractors.

The remaining contractors are struggling with strong non-union competition as-well as the increasing burden of the funding requirements of the Plan. Of the three remaining contractors, one began shutting down operations in , the second is currently out of jurisdiction and is not performing any services that would require them to contribute to the Plan, and the third remaining contractor has been left with the retiree burden created by the other contractors during the 1970's and 1980's.

You were notified in a letter dated August 22, 2007, that your request had been tentatively denied and a conference of right was held on October 2, 2007. While the Plan's remaining contributing employers have suffered substantial business hardship, even if the funding waiver were granted, the remaining contractors would not be able to make periodic payments to the Plan sufficient to cover both the amortization payments on the funding waiver plus the future ongoing cost of the Plan.

200822042

Because the remaining contractors are unable to satisfy future minimum funding requirements, and it is unreasonable to assume that the Plan will continue only if a funding waiver is granted, your request for a waiver of the minimum funding standard for the plan year ending December 31, , has been denied.

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 have any questions concerning this matter, please contact at

Sincerely yours,
Michael D. Julianelle
Director, Employee Plans