Hospital pension plan receives conditional funding waiver

Plain-English summary

A community hospital requested a waiver of its pension plan's unpaid minimum funding contribution because of temporary substantial business hardship. The hospital cited lower patient volume, outdated facilities and equipment, reduced reimbursement, and a recovery program focused on expenses, cash flow, new services, and revenue growth. The IRS granted the waiver subject to timely quarterly contributions, full minimum-funding payments for later plan years, restrictions on benefit or liability increases while the waived deficiency remains unamortized, and verification of payments. If any condition is not met, the waiver becomes retroactively null and void. The hospital also must make the waiver amortization payments required by IRC § 412(c)(1)(C).

Ruling snapshot

• Question: Does the hospital's pension plan qualify for a waiver of its required minimum funding contribution?
• Outcome: Approved
• Key authorities: IRC §§ 412(c) and 430(j)(3); ERISA § 302(c)(7)

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

201443034

INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JUL 31 2014

Uniform issue list: 412.06-00

T:EP:RA:T3

Re: Request for Waiver of Minimum Funding Standard for the
**Pension Plan. (the “Plan”)

Company =
EIN =

Dear Mr.,

This letter constitutes notice that your request for a waiver of the required minimum
funding contribution for the Plan for plan year ending May 31, 2013 has been granted
subject to the conditions listed below. This waiver is for the unpaid required minimum
contribution for the above listed plan year; all waiver amortization payments
representing the waiver must be paid as stated under section 412(c)(1)(C) of the
Internal Revenue Code (the “Code”).

1. Starting with the quarterly contribution due September 15, 2014, the Company
   makes the required quarterly contributions to the Plan in a timely fashion while
   the Plan is subject to 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. The Company makes contributions to the Plan in amounts sufficient to meet the
   minimum funding requirements for the Plan for the plan years ending May 31,
   2014 through May 31, 2018 on or before February 15th of the year following each
   respective plan year.

3. Under section 412(c)(7) of the Code, the Company is restricted from
   amending the Plan to increase benefits and/or Plan liabilities while any

2 201443034

of the waived funding deficiency remains unamortized, with only certain
exceptions as defined in section 412(c)(7)(B).

4. The Company provides verification of payment of all contributions described
   above in a timely manner to the Internal Revenue Service using the following
   address or fax number:

IRS-EP Classification

Chris Huxtable

400 North Eighth Street, Room 480
Richmond, VA 23219

Fax: 804-916-8222

You agreed to these conditions in a letter dated July 10, 2014. If any of these
conditions are not satisfied the waiver will be retroactively null and void.

The Company is a community hospital. The temporary substantial business hardship is
due to a number of factors, among them, a decrease in patient volume, outdated
facilities and equipment and decrease in reimbursement rate. To address these
difficulties the Company has implemented a comprehensive recovery program. The
recovery program focuses primarily on expense management and cash flow, initiating
new lines of services and enhancing revenue growth in existing lines of service.
Through implementation of the plan the Company has reduced expenses significantly.

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 plan
(covering employees covered by this Plan) maintained by the Company, to increase
benefits, 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)(7) 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.

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 May 31, 2013, 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.

201443034

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.

If you wish to inquire about this ruling please contact ***, Please address all
correspondence to SE:T:EP:RA:T2.

Sincerely,

William B. Hulteng, Manager
Employee Plans Technical
Enclosures:

Deleted Copy of Letter Ruling
Notice of Intention to Disclose

cc: