PLR 1218032: IRS approves a five-year extension to amortize a plan's unfunded liabilities

Plain-English summary

The IRS approved a plan's request for a five-year automatic extension to amortize unfunded liabilities as of September 1, 2008. The approval applied to the plan's amortization charge bases identified in its application. The IRS stated that the plan submitted the required information, including an actuary's certification that the plan would otherwise have an accumulated funding deficiency, that the sponsor had adopted a funding improvement plan, that projected assets would cover expected benefits and expenses, and that the required notice had been provided. The approval was issued under IRC § 431(d)(1).

Ruling snapshot

• Question: May the plan receive a five-year extension for amortizing its unfunded liabilities?
• Outcome: approved
• Key authorities: IRC §§ 431(b)(2)(B), 431(b)(4), 431(d)(1), 431(d)(1)(A), 431(d)(1)(B), and 6110(k)(3); 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

OCT 05 2009 201218032

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 as of September 1, 2008, for the above-named Plan which are 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"). This extension is effective with the plan year beginning September 1, 2008. This extension applies to the amortization charge bases as identified in your application submission, established as of September 1, 2008, with a total outstanding balance of $ as of that date.

The extension of the amortization periods of the unfunded liabilities of the Plan was granted in accordance with section 431(d)(1) of the Code. 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 to meet the criteria in section 431(d)(1)(B), including a certification from the plan's actuary that:

(i) absent the extension under subparagraph (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,

201218032

(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 (3)(A) has been provided.

We have sent a copy of this letter to the [illegible] and to your authorized representative pursuant to a power of attorney on file in 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 require further assistance in this matter, please contact [illegible].

Sincerely yours,

David M. Ziegler
Manager, EP Actuarial Group 2