PLR 201311040: IRS approves a conditional waiver of a pension plan's minimum funding contribution

Plain-English summary

The IRS approved a conditional waiver of a plan’s required minimum funding contribution for the plan year ending December 31, 2011. The waiver covered the remaining unpaid contribution and required the company to make future contributions, meet minimum funding requirements, avoid certain plan amendments, and provide proof of payment. The waiver would become retroactively void if any condition was not satisfied.

Ruling snapshot

• Question: What relief did the IRS grant under the applicable rollover or pension funding rules?
• Outcome: Approved.
• Key authorities: IRC § 412

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 20 1 3 l i 0 4 0

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION DEC 91 2012 at ef, LAT Z

Significant Index Number: 412.06-00

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In re: Request for Waiver of the Minimum Funding Standard for the ******

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This letter constitutes notice that a waiver of the required minimum funding contribution for the Plan for the plan year ending December 31, 2011 has been approved subject to the conditions listed below. This waiver is for the remaining unpaid required minimum contribution for the above listed plan year; all waiver amortization payments representing this waiver still must be paid as stated in section 412(c)(1)(C) of the Code:

1. Starting with the contribution due on January =», 20° , Company makes the
   required quarterly contributions to the Plan in a timely fashion while the Plan is subject to a waiver of the minimum funding standard. For this purpose, the total amount of each quarterly contribution will be determined in accordance with section 430(j)(3)(D) and section 430(j)(3)(E) of the Code, and can be comprised of several installments made prior to the respective due date of the quarterly contribution;

2. Company makes contributions to the Plan in amounts sufficient to meet the
   minimum funding requirements for the Plan for the plan years ending December
   ,20° through20 ,bySeptember ,20 through 20 __, respectively;

3. Under section 412(c)(7) of the Code, Company is restricted from amending the
   Plan to increase benefits or plan liabilities while any portion of the waived funding deficiency remains unamortized;

4. Company provides proof of payment of all contributions described above in a
   timely manner to the Service using the fax numbers or addresses below:

201311040

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If any one of these conditions is not satisfied, the waiver is retroactively null and void.

This conditional waiver has been granted in accordance with section 412(c) of the Internal Revenue Code and section 303 of the Employee Retirement Income Security Act of 1974 (“ERISA”).

The Company is a privately-held manufacturer of parts and components for sale primarily to the automotive industry. It has suffered a temporary substantial business hardship due to a decline in sales. It has also made significant investments in new product development, which temporarily reduced Company's net income and cash flows.

The Company has demonstrated that it has executed a strategy to increase sales and reduce expenses to improve its financial health. Its financial projections show that it will likely generate increasing profits in future years. In addition, the Company believes, and its financial projections illustrate, that its revenues and cash flows will improve adequately to satisfy the Plan’s funding obligation in the near future.

Your attention is called to section 412(c)(7) of the Code and section 302(c)(7) of ERISA which describe the consequences that would result in the event the plan is amended to increase benefits, change the rate in the accrual of benefits or to change the rate of vesting, while any portion of the waived funding deficiency remains unamortized. Please note that any amendment to a profit sharing plan or any other retirement plans (covering employees covered by this plan) maintained by the Company, to increase, or any action by the Company or its authorized agents or designees (such as a Board of Directors or Board of Trustees) that has the effect of increasing the liabilities of those plans would be considered an amendment for purposes of section 412(c) of the Code and section 302(c)(7) of ERISA. Similarly, the establishment of a new profit sharing plan or any other retirement plan by the Company (covering employees covered by this plan) would be considered an amendment for purposes of section 412(c)(7) of the Code and section 302(c)(7) of ERISA.

201311040

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.

When filing Form 5500 for the plan year ending December ,20__, the date of this letter should be entered on Schedule SB (Actuarial Information). For this reason, we suggest that you furnish a copy of this letter to the enrolled actuary who is responsible for the completion of the Schedule SB.

We have sent a copy of this letter to the Manager, EP Classification in
, and to the Manager, EP Compliance Unit in a

If you require further assistance in this matter, please contact * **** at(.)_

Sincerely,

William Hulteng, Manager
Employee Plans Technical

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