Determination 201145030: IRS denies a minimum funding waiver request

Plain-English summary

The IRS denied a nonprofit foundation's request to waive the minimum funding standard for its plan years ending December 31, 2006, 2007, and 2008. The organization had stopped operating as a health care facility, was relying on asset sales to fund the plan, and did not appear to have enough assets to meet the required funding levels. The IRS found that the organization had experienced substantial business hardship, but the hardship did not appear temporary, and the organization did not request a conference after receiving a tentative denial. The determination therefore denied the waiver request under the applicable version of IRC § 412(d)(1).

Ruling snapshot

• Question: Did the plan qualify for a waiver of the minimum funding standard for the specified plan years?
• Outcome: Denied.
• Key authorities: IRC § 412(d)(1); Rev. Proc. 2011-4, section 12.01; 26 U.S.C. § 6110(k)(3)

Full text (IRS public release)

Significant Index No. 0412.06-00

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

201145030

TAX EXEMPT AND
GOVERNMENT ENTITIES AUG 16 2011

DIVISION

SE. TEP. RA. AZ

Re:

Dear

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 years ending December 31, 2006, December 31, 2007, and December 31, 2008, has been denied.

In a letter dated March 11, 2011, you were informed that your request for a waiver of the minimum funding standard had been tentatively denied, and you were offered a conference of right in accordance with section 12.01 of Rev. Proc. 2011-4, 2011-1 I.R.B.

123. The primary reason for our tentative decision was the Company has not been
     generating revenue and is relying on the sale of assets in order to fund the Plan. The amount of assets available does not appear sufficient to continue to make the necessary minimum funding requirements to the Plan. Section 412(d)(1) of the Code (as in effect prior to the Pension Protection Act of 2006) provides that, if an employer is unable to satisfy the minimum funding standard without experiencing a temporary substantial business hardship and application of the standard would be adverse to the interests of plan participant’s in the aggregate, then the minimum funding standard for the plan year in question may be waived.

The Company had been a health care facility located in the mid-west. The Company has ceased to operate as a health care facility, but continues to exist as a non-profit foundation. The Company has experienced a substantial business hardship; however, the hardship does not appear to be temporary.

Our letter dated March 11, 2011, stated that if you did not contact us to schedule a conference within 21 days, we would finalize our ruling denying your request for a waiver of the minimum funding standards for the Plan for the plan years ending December 31, 2006, December 31, 2007, and December 31, 2008. As of June 6, 2011, we have not heard from you or your authorized representative. Accordingly, your

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201145030

request for a waiver of the minimum funding standard for the Plan for the plan years ending December 31, 2006, December 31, 2007, and December 31, 2008, 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
[illegible] to the [illegible] 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,

Andrew E. Zuckerman, Director
Employee Plans Rulings & Agreements