IRS denial 201206021: Minimum funding standard waiver denied during plan termination

Plain-English summary

The IRS denied an employer's request to waive the minimum funding standard for a defined-benefit plan for the year ending February 28, 2009. The Pension Benefit Guaranty Corporation had informed the IRS that the employer's assets had been liquidated in bankruptcy and that the plan was being terminated. Because the plan would not be continued only if the waiver were granted, the IRS concluded that the statutory hardship condition was not met. The IRS finalized the denial after the taxpayer did not schedule a conference within 21 days.

Ruling snapshot

• Question: Should the IRS waive the minimum funding standard for a plan that is being terminated?
• Outcome: Denied
• Key authorities: IRC § 412(c); Rev. Proc. 2010-4; 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


GOVERNMENT ENTITIES
DIVISION

APR 20 2010

T:EP:RA:A2

Re:

Company =
Dear [illegible]:

This letter is to inform you that your request for a waiver of the minimum funding
standard for the Plan for the plan year ending February 28, 2009, has been denied.

In a letter dated March 11, 2010, you were informed that your request for a waiver of the
minimum funding standard had been tentatively denied and were offered a conference
of right in accordance with section 12.01 of Rev. Proc. 2010-4, 2010-1 I.R.B. 122. Our
primary reason for the tentative denial was that the Pension Benefit Guaranty
Corporation (“PBGC’) had informed us that the assets of the Company had been
liquidated as part of a bankruptcy filing and that the Plan was in the process of being
terminated. Section 412(c)(1)(A) of the Code 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 participants in the aggregate, then the minimum funding standard for the plan year
in question may be waived. Section 412(c)(2)(D) provides that one of the factors taken
into account in determining temporary substantial business hardship is that it is
reasonable to expect that the plan will be continued only if the waiver is granted.
However, it is not reasonable to expect that the Plan will be continued only if your
request for a waiver of the minimum funding standard for the Plan for the plan year
ending February 28, 2009, is granted since the Plan is being terminated.

Our letter dated March 11, 2010, 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 standard for the Plan for the plan year ending

February 28, 2009. As of April 8, 2010, we have not heard from you or your authorized
representative. Accordingly, your request for a waiver of the minimum funding standard
for the Plan for the plan year ending February 28, 2009, has been denied.


Page 2 201206021

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

and to the [illegible]. If you require further
assistance concerning this matter, please contact [illegible]

Sincerely yours,

[illegible]

Andrew E. Zuckerman, Director
Employee Plans Rulings & Agreements