Minimum-funding waivers are denied because the hardship was not temporary

Plain-English summary

A company requested waivers of its pension plan's minimum funding standard for several redacted plan years. Its recovery plan depended in part on merging the plan into a multiemployer plan, but the merger had not occurred, no completion date had been set, and requested written updates had not been provided. The IRS found that the company's substantial business hardship did not appear temporary even if the merger occurred because the economic pressures causing former clients to leave remained. After the company did not respond within the stated period following a tentative denial, the IRS finalized its denial of the waiver requests.

Ruling snapshot

• Question: Did the company's financial circumstances justify minimum-funding waivers for the redacted plan years?
• Outcome: Denied
• Key authorities: IRC § 412; Rev. Proc. 2014-4, § 12.01

Full text (IRS public release)

Significant Index No. 0412.06-00

DEPARTMENT OF THE TREASURY 201511042
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

DEC 18 2014

T:EP:RA:A2

Re:

Company = [redacted]
Multiemployer Plan = [redacted]

Dear [redacted]:

This letter is to inform you that the Company's requests for waivers of the minimum
funding standard for the Plan for the plan years ending [redacted]
and [redacted] through [redacted], have been denied.

In a letter dated [redacted] you were informed that your requests for waivers of
the minimum funding standard had been tentatively denied and were offered a
conference of right in accordance section 12.01 of Rev. Proc. 2014-4, 2014-1 I.R.B.

152. Our tentative denial was based on our analysis of the financial information
     provided by the Company. Our analysis concluded that the Company continues to
     experience a substantial business hardship that does not appear to be temporary,
     assuming the Company is required to continue funding the Plan as a single-employer
     plan. A key component of the Company's financial recovery plan, which was provided
     with the waiver requests, is the finalization of a merger of the Plan with the
     Multiemployer Plan. While the merger in itself would not necessarily resolve the
     Company's financial hardship, it would help it to stabilize its ongoing financial health.

However, while the Company has been optimistic in the updates that it has given us
since the conference of right took place [redacted] the merger, which was expected to
be finalized by [redacted], has not taken place, and according to an update
given to us on [redacted] the trustees of the Multiemployer Plan have still not set a
date to finalize the merger. Although we have asked for updated information
concerning the merger in writing, we have not received the information from the
Company to date.

2 201511042

Nevertheless, even if the merger takes place, our analysis concludes that the
Company’s financial hardship does not appear to be temporary. Many of the financial
pressures that have caused the Company's former clients, most of which are
multiemployer plans, to drop the Company’s services have not been alleviated in the
current economic climate.

Our letter dated [redacted] stated that if you did not contact us to schedule a
conference within 21 days, we would finalize our ruling denying your request for waivers
of the minimum funding standard for the Plan for the plan years ending
[redacted], and [redacted]. As of the date of this letter, we have not heard from
you. Accordingly, your request for waivers of the minimum funding standard for the
Plan for the plan years ending [redacted], and [redacted], has
been denied.

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, and to the Manager, EP Compliance Unit in Chicago. If you require further
assistance concerning this matter, please contact [redacted] at
[redacted].

Sincerely yours,

William B. Hulteng, Manager
Employee Plans Technical

cc: Manager, EP Classification
Baltimore, Maryland

Manager, EP Compliance Unit
Chicago, Illinois