Pension minimum funding waivers approved with conditions

Plain-English summary

An automotive-parts supplier sought waivers of its pension plan's minimum required contributions for two redacted plan years after industry decline, a reduced customer base, and necessary investments strained its finances. The IRS approved the waivers subject to conditions. The company must make contributions that keep unpaid required contributions below specified limits, provide proof of payment, continue making waiver-amortization payments, and avoid benefit increases while any waived funding deficiency remains unamortized except as permitted by law.

Ruling snapshot

• Question: Would the pension plan receive waivers of its minimum required contributions for two plan years?
• Outcome: Approved subject to contribution, reporting, and plan-amendment conditions
• Key authorities: IRC § 412(c); ERISA § 302(c)(7)

Full text (IRS public release)

DEPARTMENT OF THE TREASURY 201449011
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

SEP 11 2014

T:EP:RA:T2

Significant Index Number: 412.06-00

In re: ***** *** **
*** (Plan No. *)
EIN: **
Company = *****
Plan = *****

Dear ***:

This letter constitutes notice that waivers of the minimum required contribution for the
Plan for the plan years ending December 31, * and December 31, * have been
approved subject to the conditions listed below. The waiver is for the required minimum
contribution for the above listed plan years; all waiver amortization payments
representing this waiver still must be paid as stated in section 412(c)(1)(C) of the Code:

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

2. The Company shall make contributions sufficient to prevent the unpaid minimum
   required contribution for all years (as reported on line 40 of the **** version of
   the Schedule SB of Form 5500) from exceeding:

a. $* on the Schedule SB,
b. $* on the Schedule SB,
c. $** on the ** Schedule SB,
d. $0 on the 2016 and later Schedule SB filings.

2 201449011

3. The Company provides proof of payment of all contributions described above in a
   timely manner to the Service using the fax number or address below.

IRS - EP Classification
Mr. Chris Huxtable
400 North 8th Street, Room 480
Richmond, VA 23219
Fax: 804-916-8222

The Company is a supplier of parts to the automotive industry. It has suffered a
substantial business hardship due to problems arising from the overall decline in the
steel industry over the previous years, which reduced Company’s customer base. It has
also been forced to make significant investments in the services that it provides, which
reduced Company’s net income and cash flows. The Company has undertaken steps
to improve its overall financial standing.

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.

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 31, * and December 31,
*, 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 Baltimore,
Maryland, to the Manager, EP Compliance Unit in Chicago, Illinois.

A copy of this letter ruling has been sent to your authorized representative pursuant to a
power of attorney on file in this office.

3 201449011

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

Sincerely,

William Hulteng, Manager
Employee Plans Technical

cc: Manager, EP Classification
Baltimore, Maryland

   Manager, EP Compliance Unit
   Chicago, Illinois

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