Multiemployer plan funding waivers denied after largest employer withdraws

Plain-English summary

A multiemployer pension plan sought minimum-funding waivers for three plan years, citing substantial business hardship among several contributing employers. After a conference, the IRS considered granting the waivers subject to stringent conditions. Before those conditions were finalized, the plan's largest contributing employer began withdrawing, and the sponsor reported that the plan was no longer on course to avoid insolvency. The IRS denied the waivers because the remaining employers were unlikely to meet future funding obligations and advised that § 4971(a) excise taxes were due.

Ruling snapshot

• Question: Should the multiemployer pension plan receive minimum-funding waivers for three redacted plan years?
• Outcome: Denied. The largest employer's withdrawal left the plan unable to satisfy ongoing funding requirements.
• Key authorities: IRC § 4971(a)

Full text (IRS public release)

201419023

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

FEB 14 2014

T:EP:RA:T2
Significant Index Number: 412.06-00

In re: Requests for Waivers of the Minimum Funding Standard for the ****

EIN: -* (Plan No. )

Sponsor = ***

Plan = ***

Dear ***:

This letter is to inform you that your requests for waivers of the minimum funding standard for the above-named plan for the plan years ending September 30, 20__, 20__, and 20__ have been denied.

The Sponsor operates a multiemployer pension plan. As of September 1, 2011, eleven (11) employers contribute to the Plan. The Plan’s contributing employers cover a diverse group of jobs in the Midwestern United States. All of the employers are either directly or indirectly impacted by the automotive industry. Three of the eleven (11) contributing employers state that they are unable to satisfy the minimum funding standard for the plan years in question without incurring substantial business hardship and the application of such standard would be adverse to the interest of Plan participants in the aggregate.

After being notified that that its requests had been tentatively denied, the Sponsor, along with its representatives attended a Conference of Right with the IRS on September 1, 2011. The Sponsor provided additional documentation following the Conference of Right offered in support of its requests. Based on assurances made during and information provided following the Conference of Right, the IRS proposed granting the requested waivers provided a set of very stringent conditions were met. The IRS proposal noted that except as otherwise indicated, the failure to satisfy any of the conditions would render any granted waivers retroactively null and void.

Before the proposed conditions could be finalized, the Sponsor notified the IRS on May 24, 2012, that the Plan’s largest contributing employer was in the process of withdrawing from the

201419023

2

Plan. Further, in an October 15, 2012, letter to the Plan’s remaining contributing employers disclosed that the largest contributing employer withdrawing from the Plan meant the Plan was “no longer on course to avoid insolvency and regain financial solvency.”

After considering all financial information the Sponsor has supplied, we have determined that due to the recent event of the largest participating employer withdrawing from the Plan, even if the funding waivers were granted, the Sponsor’s financial submission illustrates that it would not be able to satisfy its ongoing obligation to the Plan. Therefore, because the participating employers are likely unable to satisfy future funding requirements, your requests for waivers of the minimum funding standard for the plan years ending September 30, 20__, 20__, and 20__ are denied.

You should note that excise taxes under section 4971(a) of the Internal Revenue Code (“Code”) are currently due on the minimum funding requirement for the plan years ending September 30, 20__, 20__, and 20__. You should file a Form 5330 as soon as possible to report and pay the taxes.

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.

We have sent a copy of this letter to the Manager, EP Classification in Baltimore, Maryland, to the Manager, EP Compliance Unit in Chicago, Illinois.

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

Sincerely yours,

William Hulteng
Manager, Employee Plans Technical

cc: Manager, EP Classification
Baltimore, Maryland

Manager, EP Compliance Unit
Chicago, Illinois

Control Numbers ******