Funding-waiver cases close while section 4971 tax is conditionally waived

Plain-English summary

A financially distressed private manufacturer had failed to satisfy its pension plan's minimum funding standard for three plan years and sought plan termination through the Pension Benefit Guaranty Corporation. At the company's request, its minimum-funding-waiver applications for those years were withdrawn and the cases were closed. The IRS separately granted conditional waivers of the 100 percent excise tax under IRC § 4971(b) for seven plan years. Those tax waivers depended on PBGC approval of the plan's termination and covered unpaid minimum required contributions that had not been corrected.

Ruling snapshot

• Question: What relief applied after the company withdrew its minimum-funding-waiver requests and pursued PBGC termination of the plan?
• Outcome: Mixed. The funding-waiver cases were withdrawn and closed, while the § 4971(b) tax was conditionally waived.
• Key authorities: IRC § 4971(b); ERISA § 3002(b)

Full text (IRS public release)

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

FEB 14 2014

Uniform Issue List 4971.01-00

T:EP:RA:T2

Re: ******** (Plan No. ) (“Plan”) EIN: -*

Company = ****

Dear ******:

This letter constitutes notice that pursuant to your request of January 24, 2014:

(1) Your request for waivers of the minimum funding standard for the Plan for the plan years ending December 31, 2008, December 31, 2009, and December 31, 2010, have been withdrawn, and the cases have been closed by this office; and

(2) Waivers of the 100 percent tax under section 4971(b) of the Internal Revenue Code (“Code”) have been granted for the Plan for plan years ending December 31, 2008 through December 31, 2014, on the condition that the Company's application to the Pension Benefit Guaranty Corporation (“PBGC”) for termination of the Plan is approved.

The conditional waivers of the 100 percent tax have been granted in accordance with section 3002(b) of the Employee Retirement Income Security Act (“ERISA”). The amount of the excise tax for which the conditional waiver has been granted is equal to 100 percent of the total unpaid minimum required contributions for plan years ending December 31, 2008 through December 31, 2014, to the extent such unpaid minimum required contributions have not been corrected.

Company is a privately owned manufacturer. It has suffered a significant financial hardship which harmed its net income and cash flows. Company’s financial submissions illustrate that it cannot satisfy the minimum funding standard for the Plan in the future. Company did not satisfy the minimum funding standard for the Plan for the plan years ending December 31, 2008, December

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31, 2009, and December 31, 2010, and a request has been filed with the PBGC to effect a termination of the Plan. This request is still pending.

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, and to your authorized representative pursuant to a power of attorney on file in this office.

If you require further assistance in this matter, please contact *** at

(*) -**

Sincerely yours,

Michael J. Sanders, Acting Director
Employee Plans Rulings & Agreements

cc: Manager, EP Classification
Baltimore, Maryland

Manager, EP Compliance Unit
Chicago, Illinois