PLR 201216048: IRS approves a five-year extension to amortize unfunded plan liabilities

Plain-English summary

The IRS approved a request for a five-year automatic extension to amortize specified unfunded liabilities of a retirement plan. The extension applied to eligible amortization charge bases established for the plan year beginning September 1, 2010. The letter states that the plan submitted the required information, including an actuary's certification that the plan would otherwise have a 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 approval was issued under the minimum funding rules in section 431(d)(1), with corresponding ERISA provisions also identified.

Ruling snapshot

• Question: Did the retirement plan satisfy the requirements for a five-year extension of its amortization period for specified unfunded liabilities?
• Outcome: Approved
• Key authorities: IRC § 431(d)(1); ERISA § 304; IRC § 6110(k)(3).

Full text (IRS public release)

Significant Index Number 0431.00-00

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

201216048

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JAN 24 2012

T:EP:RA:A2

Re: [illegible]

Taxpayer = [illegible]

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 September 1, 2010, and applies to the eligible amortization charge bases identified in your application submission, established 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

201216048

(iv) the notice required under paragraph 431(d)(3)(A) has been provided.

We have sent a copy of this letter to the [illegible] and to the [illegible] and to your authorized representative pursuant to a power of attorney (Form 2848) on file with this office.

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