Automotive company receives a conditional minimum-funding waiver

Plain-English summary

An automotive-equipment manufacturer requested a waiver of its pension plan's required minimum contribution after the recession caused a temporary substantial business hardship. The IRS granted the waiver subject to five conditions, including acceptable collateral, payment of older unpaid contributions, timely quarterly and annual contributions, and restrictions on benefit-increasing amendments. The company must provide the IRS and Pension Benefit Guarantee Corporation prompt proof of required payments. Any failure to satisfy a condition makes the waiver retroactively null and void.

Ruling snapshot

• Question: Could the manufacturer's pension plan receive a waiver of its required minimum funding contribution after a temporary business hardship?
• Outcome: Approved, subject to conditions
• Key authorities: IRC §§ 412(c) and 430(j); ERISA § 302

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

DEC 30 2014

Uniform Issue List: 412-06-00

T:EP:RA:T2

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

Company = *
EIN = *

Dear ,

This letter constitutes notice that your request for a waiver of the required minimum funding contribution for the Plan for the plan year ended December 31, 20 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. Collateral acceptable to PBGC shall be provided to the Plan for the full amount
   of the funding waiver for the 20 plan year by the later of (a) 120 days from the date of the IRS ruling letter granting the waiver (“Final Ruling Letter”) and (b) the earlier of (i) the date PBGC notifies the IRS in writing that this condition has not been met, and (ii) 360 days from the date of the Final Ruling Letter.

2. By July 15, 2015, the Plan shall have no due and unpaid employer
   contributions for any plan year beginning before January 1, 2013.

3. Starting with the quarterly contribution due April 15, 2015, the Company shall
   make the required quarterly contributions to the Plan on or before their required due dates, in amounts calculated by *'s actuary in accordance with section 430(j)(3)(D) of the Internal Revenue Code of 1986, as amended, and, whenever applicable, section 430(j)(4) of the Code. Until full amortization of the waived amount,

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* shall provide PBGC with written evidence of each quarterly contribution payment within fifteen (15) business days of the contribution’s due date.

4. The Company shall make annual contributions to the Plan in amounts
   sufficient to meet the minimum funding requirements for the Plan for the plan years beginning January 1, 2014, through January 1, 2018, on or before September 15th of the year following each respective plan year. Until full amortization of the waived amount, the Company shall provide PBGC with written evidence of each annual contribution payment within fifteen (15) business days of September 15th of the year following each respective plan year.

5. 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). The Company shall copy PBGC on any correspondence with the IRS regarding notification of or application for such an exception.

You agreed to these conditions in a letter dated December 24, 2014. If any of these conditions is not satisfied the waiver will be retroactively null and void.

The Company shall provide verification, within fifteen (15) business days of payment of all contributions described above to the Service and the PBGC to the addresses below:

IRS-EP Classification

Chris Huxtable

400 North Eighth Street, Room 480
Richmond, VA 23219

Fax: 804-916-8222

Pension Benefit Guarantee Corporation
Corporate Finance and Restructuring Department
1200 K Street NW

Washington, DC 20005

Fax: 202-842-2643

This conditional waiver has been granted in accordance with section 412(c) of the Code and section 302 of the Employee Retirement Income Security Act of 1974 (“ERISA”).

The Company is a manufacturer and distributor of automotive equipment. The temporary substantial business hardship was precipitated by the economic recession which impacted the automotive industry particularly hard. As part of its recovery the Company has focused on reduction in costs, sale of non-critical assets, and an infusion of equity capital. Between 2012 and 2013 revenues increased significantly, almost 30%, and continued growth is forecast.

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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 December 31, 20 , the date of this letter should be entered on Schedules 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 respective Schedules SB.

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.

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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:

Manager, EP Classification
Baltimore Maryland

Manager, EP Compliance
Chicago, Illinois