IRS approves a five-year extension for amortizing a pension plan's unfunded liabilities

Plain-English summary

The IRS approved a five-year automatic extension for a pension plan to amortize unfunded liabilities as of January 1, 2010. The extension applies to the eligible amortization charge bases and was granted after the plan provided the required information, including an actuary's certification about its funding status, projected assets, and required notice. The extension is effective for the plan year beginning January 1, 2010.

Ruling snapshot

• Question: Could the plan receive a five-year extension for amortizing its unfunded liabilities?
• Outcome: Approved, effective for the plan year beginning January 1, 2010.
• Key authorities: IRC § 431(d); ERISA §§ 304(b)(2)(B) and 304(b)(4)

Full text (IRS public release)

201222067

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

TAX EXEMPT AND
JAN 13 2011

GOVERNMENT ENTITIES
DIVISION

TEP RAL AZ

Re: [illegible]
Taxpayer = [illegible]

Dear [illegible]

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 January 1, 2010, 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 January 1, 2010. This extension applies to the eligible amortization charge bases, established as of January 1, 2010.

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,

2 201222067

(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 the [illegible].

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,
[illegible signature]

David M. Ziegler
Manager, EP Actuarial Group 2