PLR 1130016: IRS denied a minimum funding waiver because the business hardship was not temporary

Plain-English summary

A company requested a waiver of the minimum funding standard for its pension plan for the year ending March 31, 2009. The IRS found that the company was experiencing significant financial distress, but concluded that the hardship was not temporary and that the company could not make the future payments required to support the plan. The IRS denied the waiver and noted that excise taxes under section 4971(a) were due on the minimum funding requirement.

Ruling snapshot

• Question: Whether the company qualified for a waiver of the pension plan's minimum funding standard.
• Outcome: Denied.
• Key authorities: IRC § 4971(a); minimum funding waiver rules for pension plans.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 201130016

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION MAY 5 2011

Significant Index Number: 412.06-00

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Dear Kk kK KKK KKK,

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 March 31, 2009, is denied.

The Company manufactures abrasive for and
distributors. It has one owner and employees. The Company and the Plan operate

on a fiscal year ending March 31.

The facts of the Company's situation show that it is experiencing significant financial
distress. This is seen in the decline in sales and losses that the Company has incurred
from 2007 through 2009. While the Company has adjusted payroll and expenses in an
attempt to improve its financial situation, the Company's cash flows have suffered
greatly due to a decrease in sales volume. The Company states also that it has had no
resources to promote its products and pursue new business.

You were notified in a letter dated March 29, 2011, that your request had been
tentatively denied. The letter stated that you had 21 days from that date to request a
Conference of Right. We did not receive a timely response to the letter; therefore, you
have waived your right to a conference.

After considering all financial information the Company has supplied, we have
determined that its business hardship is not temporary. Furthermore, even if the
funding waiver were granted, the Company's financial submission illustrates that it
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.
Therefore, because the Company's financial hardship does not appear to be temporary,
and it is unable to satisfy future minimum funding requirements, your request for a

q

: 201130016

waiver of the minimum funding standard for the plan year ending March 31, 2009, is
denied.

You should note that excise taxes under section 4971(a) of the Internal Revenue Code
(“Code”) are currently due on the minimum funding requirement for the Plan year ending
March 31, 2009. You should file a Form 5330 as soon as possible to report and pay the

taxes.

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 Manager, EP Classification in Baltimore, Maryland, to the
Manager, EP Compliance Unit in Chicago, Illinois. If you require further assistance in
this matter, please contact RXKKKKKKEKK (ID# ilalalalalaleialaled at (***) ahaha ahahaha

Sincerely yours,

William Hulteng
Manager, Employee Plans Technical

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