IRS approval of 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. The plan submitted the required information and 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 approval was granted under § 431(d)(1) and applies to the amortization charge bases identified in the application.

Ruling snapshot

• Question: Did the pension plan qualify for a five-year extension of the amortization period for its unfunded liabilities?
• Outcome: Approved
• Key authorities: IRC § 431(d)(1); ERISA §§ 304(b)(2)(B), 304(b)(4)

Full text (IRS public release)

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

201227007

GOVERNMENT ENTITIES
DIVISION

UIL: 431.00-00
T:EP:RA:A2

February 4, 2010

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
January 1, [redacted] 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, [redacted]. This extension applies to the amortization charge bases as identified in
your application submission, established as of January 1, [redacted], with a total
outstanding balance of $[redacted] 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,

(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
[redacted]
to the [redacted] 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 [redacted]

Sincerely yours,

David M. Ziegler
Manager, EP Actuarial Group 2