Minimum funding waiver approved with contribution and amendment conditions

Plain-English summary

A retirement plan sponsor requested a waiver of its minimum required contribution after suffering substantial business hardship. The company’s largest customer changed its business model, forcing the company to invest heavily in sales infrastructure and reducing net income and cash flow. The IRS approved the waiver subject to several conditions. While the waived deficiency remained unamortized, the company generally could not amend the plan to increase benefits or liabilities. It also had to meet specified annual funding deadlines, make required quarterly contributions on time, and promptly provide proof of payment to the IRS. The ordinary waiver amortization payments remained due.

Ruling snapshot

• Question: Would the IRS waive the plan’s minimum required contribution because of the sponsor’s substantial business hardship?
• Outcome: Approved
• Key authorities: IRC §§ 412(c) and 430(j); ERISA § 302(c)(7)

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE 201510061
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

DEC 12 2014

SE:T:EP:RA:T2

Significant Index Number: 412.06-00

In re: ********* (Plan No. )
EIN: -*

Company = ***
Plan = *****

Dear **:

This letter constitutes notice that a waiver of the minimum required contribution for the
Plan for the plan year ending May 31, has been approved subject to the conditions
listed below. The waiver is for the required minimum contribution for the above listed
plan year; 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 makes contributions to the Plan in an amount sufficient to meet
   the minimum funding requirements for the Plan for the plan years ending May 31,
   2015, through 2019, by February 15, 2016 through 2020, respectively;

3. Starting with the quarterly contribution due on March 15, 2015, the Company
   makes the required quarterly contributions to the Plan in a timely fashion while
   the Plan is subject to a waiver of 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

201510061

can be comprised of several installments made prior to the respective due date
of the quarterly contribution;

4. 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

Fax: ****

The Company has suffered a substantial business hardship due to problems arising
from a change in its largest customer's business model, which has caused a change in
the Company’s methods of doing business. This has forced the Company to make
significant investments in its sales infrastructure, which has reduced Company's net
income and cash flows. The Company has also undertaken additional 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 May 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.

201510061

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

Sincerely,

[illegible]
William Hulteng, Manager
Employee Plans Technical

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