PLR 1020030: IRS approved a five-year extension to amortize a plan's unfunded liabilities

Plain-English summary

The IRS approved a plan's request for a five-year extension to amortize unfunded liabilities described in IRC § 431(b)(2)(B) and § 431(b)(4). The approval was granted under § 431(d)(1), after the plan submitted the required information and an actuary's certification. The certification stated that, without the extension, the plan would have an accumulated funding deficiency in the current year or one of the next nine years, that the sponsor had adopted a funding-improvement plan, that projected assets would cover expected benefits and expenses during the extended period, and that the required notice had been provided. The extension applied to the amortization charge base identified in the application, but not to charge bases that had previously been extended.

Ruling snapshot

• Question: Could the plan receive a five-year extension to amortize its unfunded liabilities under IRC § 431(d)(1)?
• Outcome: Approved
• Key authorities: IRC §§ 431(b)(2)(B), 431(b)(4), 431(d)(1), 304(b)(2)(B), 304(b)(4), and 6110(k)(3)

Full text (IRS public release)

Significant Index Number 0431.00-00

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

FEB 24 2010

Re:

Taxpayer =

Dear

This letter constitutes notice that approval has been granted for your request for
a 5-year automatic extension for amortizing the unfunded liabilities as of
January 1, 20 , for the above-named Plan which are described in sections
431(b)(2)(B) and 431(b)(4) of the Internal Revenue Code (“Code”), and sections
304(b)(2)(B) and 304(b)(4) of the Employee Retirement Income Security Act of
1974 (“ERISA”). This extension is effective with the plan year beginning
January 1, 20 . This extension applies to the amortization charge base as
identified in your application submission, established as of January 1, 20 _, with
a total outstanding balance of $ as of that date. Approval has not
been granted to extend amortization charge bases that have previously been
extended.

The extension of the amortization periods of the unfunded liabilities of the Plan
was granted in accordance with section 431(d)(1) of the Code. Section
431(d)(1)(A) of the Code requires the Secretary to extend the period of time
required to amortize any unfunded liability of a plan for a period of time (not in
excess of 5 years) if the Plan submits an application meeting the criteria stated in
section 431(d)(1)(B). The plan has submitted the required information to meet
the criteria in section 431(d)(1)(B), including a certification from the plan's actuary
that:

(i) absent the extension under subparagraph (A), the
plan would have an accumulated funding deficiency in the
current plan year or any of the 9 succeeding plan years,
(ii) the plan sponsor has adopted a plan to improve the
plan's funding status,

201020030

(iii) the plan is projected to have sufficient assets to
timely pay expected benefits and anticipated expenditures
over the amortization period as extended, and

(iv) the notice required under paragraph (3)(A) has been
provided.

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.

This ruling is directed only to the taxpayer that requested it. Section 6110(k)(3)
of the Internal Revenue Code provides that it may not be used or cited by others
as precedent.

If you require further assistance in this matter, please contact
Sincerely yours,

David M. Ziegler
Manager, EP Actuarial Group 2