Pension funding excise tax conditionally waived

Plain-English summary

A company's financial condition had deteriorated, it could no longer contribute to its pension plan, and it was pursuing a distress termination through the Pension Benefit Guaranty Corporation. The IRS found that imposing the 100 percent excise tax on unpaid minimum required contributions would create substantial business hardship and harm plan participants as a group. It conditionally waived the IRC § 4971(b) tax for two plan years, provided the PBGC approved the distress termination.

Ruling snapshot

• Question: Could the company receive waivers of the 100 percent pension funding excise tax for two plan years?
• Outcome: Approved
• Key authorities: IRC §§ 412(c), 4971(b); Rev. Proc. 81-44; ERISA § 3002(b)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201550015 Third Party Communication: None
Release Date: 12/11/2015 Date of Communication: Not Applicable
Index Number: 4971.02-00
Person To Contact:
----------------- ----------------------, ID No. ----------------
-------------------------------- Telephone Number:
------------------------------- --------------------
----------------------- Refer Reply To:
---------------------------- CC:TEGE:EB:QP2
-------------------------------------------- PLR-108770-15
Date:
September 2, 2015

Legend

Company = -----------------

Plan = ----------------------------------------

Plan Year A = ------------------------------------------

Plan Year B = ------------------------------------------

Dear -------------------

This letter constitutes notice that, pursuant to the December 30, 2014 request by
Company’s authorized representative, waivers of the 100 percent tax under section
4971(b) of the Internal Revenue Code (“Code”) have been granted for Plan Year A and
Plan Year B, on the condition that Company’s application to the Pension Benefit
Guaranty Corporation (“PBGC”) for a distress termination of the Plan is approved.

In accordance with section 3.04 of Rev. Proc. 81-44, 1981-2 C.B. 618, your authorized
representative furnished evidence that imposition of the 100 percent excise tax would
be a substantial business hardship and would be adverse to the interest of plan
participants in the aggregate. Based on the documentation received, the financial
condition of Company has deteriorated significantly and it cannot continue to afford to
make any contributions to the Plan. Also, in the letter from your authorized
representative, the Internal Revenue Service was informed that Company is pursuing a
distress termination of the Plan with the PBGC. Company did not seek a waiver of the
minimum funding standard under section 412(c) with respect to Plan Years A or B
because its substantial business hardship is not expected to be temporary.
PLR-108770-15 2

The conditional waivers of the 100 percent tax have been granted in accordance with
section 3002(b) of the Employee Retirement Income Security Act of 1974 (“ERISA”).
The amounts for which the conditional waivers have been granted are equal to 100
percent of the Plan’s unpaid minimum required contributions as of December 31 of Plan
Years A and B, the end of the plan years for which the waivers have been granted, to
the extent such unpaid minimum required contributions have not been corrected.

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter.

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.

The ruling contained in this letter is based upon information and representations
submitted by taxpayer’s authorized representative and accompanied by a penalty of
perjury statement executed by an appropriate party. While this office has not verified
any of the material submitted in support of the request for ruling, it is subject to
verification on examination.

                                   Sincerely,



                                   Lauson C. Green
                                   Branch Chief, Qualified Plans Branch 2 (Employee
                                   Benefits)
                                   (Tax Exempt & Government Entities)