Excise tax waivers granted for unpaid pension contributions

Plain-English summary

The IRS granted waivers of the 100 percent excise tax under section 4971(b) for four plans' unpaid minimum required contributions for the plan year ending December 31, 2011. The company had filed for Chapter 11 bankruptcy and represented that the bankruptcy prevented it from paying contributions incurred before the filing. The IRS found that imposing the excise tax would create substantial business hardship and would be adverse to plan participants as a whole. The company was expected to make the unpaid contributions after emerging from bankruptcy.

Ruling snapshot

• Question: Should the section 4971(b) excise tax be waived for unpaid minimum required pension contributions?
• Outcome: Approved
• Key authorities: IRC § 4971(b); ERISA § 3002(b)

Full text (IRS public release)

201415016

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

FEB 14 2014

Uniform Issue List: 4971.02-00

Legend:

Company = ****

Plan A = *******

Plan B = *****
*****,

Plan C = ***** **

Plan D = **** ******

Dear **:

This letter constitutes notice that pursuant to your request of August 12, 2013, waivers of the 100% excise tax under section 4971(b) of the Internal Revenue Code (“Code”) for Plan A, Plan B, Plan C, and Plan D arising from the unpaid minimum required contributions for the plan year ending December 31, 2011 have been granted to the Company.

The waiver of the 100% excise tax has been granted in accordance with section 3002(b) of the Employment Retirement Income Security Act of 1974 (ERISA).

201415016

The amount for which these excise tax waivers have been granted is equal to 100% of the contribution which would otherwise be required to satisfy the minimum required contribution as of the end of each of the applicable plan years for which a waiver is granted to the extent such deficiency has not been corrected.

The Company has filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, which does not allow for payment of debts incurred prior to the bankruptcy filing. It submits that it could afford to make the contributions to the Plan A, Plan B, Plan C, and Plan D, but was barred from doing so because it had filed for bankruptcy. Upon emerging from bankruptcy, Company will make all required unpaid minimum required contributions to Plan A, Plan B, Plan C, and Plan D. The Company has shown through its submission of financial data that imposition of the section 4971(b) excise tax would be a substantial business hardship and would be adverse to plan participants as a whole.

This ruling letter is directed only to the taxpayer requesting it. Code section 6110(k)(3) provides that it may not be used or cited as precedent.

We have sent a copy of this letter to the Manager, EP Classification in Baltimore, Maryland, and to the Manager, EP Compliance Unit in Chicago, Illinois. Additionally, pursuant to the power of attorney on file with this office, a copy of this letter ruling is being sent to your authorized representative. If you wish to inquire about this ruling, please contact * * (I.D. *) at ()
-****. Please address all correspondence to SE:T:EP:RA:T2.

Sincerely,

William Hulteng, Manager
Employee Plans Technical

cc: ******