IRS determination 1205024: Five-year extension for pension plan amortization

Plain-English summary

The IRS approved a five-year automatic extension for amortizing a plan's unfunded liabilities. The extension applies to eligible outstanding amortization charge bases for the plan year beginning July 1, 2010. The plan submitted the required information, including an actuary's certification that it would otherwise have an accumulated funding deficiency, had adopted a funding-improvement plan, was projected to have enough assets for expected benefits and expenses, and had provided the required notice. The determination also directs that copies be sent to specified recipients and the plan's enrolled actuary.

Ruling snapshot

• Question: May a pension plan receive a five-year extension for amortizing specified unfunded liabilities?
• Outcome: Approved.
• Key authorities: IRC § 431(d); ERISA §§ 304(b)(2)(B) and 304(b)(4).

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

November 08, 2011

201205024

[illegible handwritten notation]

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 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). The extension of the amortization periods of the unfunded liabilities of the
Plan has been granted in accordance with section 431(d)(1) of the Code. This
extension is effective for the plan year beginning July 1, 2010, and applies to the eligible
outstanding amortization charge bases as of that date.

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, including a certification
from the plan’s actuary that:

(i) absent the extension under subparagraph 431(d)(1)(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 431(d)(3)(A) has been
provided.

201205024

We have sent a copy of this letter to the [illegible] and to the [illegible]. A copy of this
letter should be sent to the enrolled actuary for the Plan.

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 have any questions regarding this matter, please contact

Sincerely,

David M. Ziegler, Manager
Employee Plans Actuarial Group 2