PLR 201110016: amortization extension denied because the plan lacked a funding improvement plan

Plain-English summary

The IRS denied a request for an automatic extension of the period for amortizing a plan's unfunded liabilities. The plan year at issue began October 1, 2009. The actuarial certification stated that the plan sponsor had not devised a funding improvement plan and might do so in the 2010-11 plan year if necessary. Because the certification did not satisfy the requirement that the sponsor have adopted a plan to improve funding status, the IRS could not grant the requested extension under section 431(d).

Ruling snapshot

• Question: Did the plan satisfy the statutory conditions for an automatic amortization extension?
• Outcome: Denied.
• Key authorities: IRC § 431(d)(1), including § 431(d)(1)(A) and (B).

Full text (IRS public release)

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

201110016
[illegible] DEC 14 2010 201110016

DIVISION

T:EP:RA:A2

Re:

Taxpayer =’
Dear.

This is in response to your ruling request dated September 30, 2010, from your authorized representative, in which you request an automatic amortization extension contained in section 431(d) of the Internal Revenue Code (the “Code”). This extension would be effective for the plan year beginning October 1, 2009. This letter is to inform you that your request has been denied.

The extension of the amortization periods of the unfunded liabilities of the Plan falls under 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 must submit 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,

(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.

201110016
The actuarial certification provided indicated that:

“II. The plan sponsor has not devised a plan to improve the plan’s funding status. Such a plan will be devised in the 2010-11 plan year, if necessary. The Trustees will be working on a plan to eliminate the projected funding deficiency.”

Based on the above actuarial certification, section 431(d)(1)(A)(ii) has not been met. Therefore, we cannot provide a favorable ruling for an extension.

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

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

Pursuant to a power of attorney on file with this office, a copy of this letter ruling is being sent to your authorized representative.

If you require further assistance in this matter, please contact '

Please address all correspondence to
SE:T:EP:RA:A2.

Sincerely yours,

David M. Ziegler
Manager, EP Actuarial Group 2