The Internal Revenue Service has issued a new interpretation that could affect business owner clients who have failed to keep up with their pension plan payments.
The IRS has told a taxpayer how to recover from the fact that, because of the effects of the COVID-19 pandemic, the taxpayer failed to meet minimum pension plan funding requirements for a plan year.
Janet Laufer, an IRS senior technician reviewer, issued a private letter ruling, PLR 202211001, approving the taxpayer's request for a waiver of the usual funding standard.
Laufer did not identify the taxpayer or indicate whether the taxpayer was a company or an individual.
The Ruling
Laufer said that her understanding is that the taxpayer "has been suffering from a temporary substantial business hardship due to issues arising from certain projects it was involved in, as well as the effects from the COVID-19 pandemic, both of which significantly affected its liquidity and profitability."
"Taxpayer has implemented a series of actions to facilitate its long term improvement, and its financial projections illustrate that its cash flows will improve adequately to satisfy the plan's funding obligation in the near future," according to the letter.
Laufer said that, based on the description presented, the taxpayer has met the legal pension contribution standard for a "temporary substantial business hardship."
Laufer required the taxpayer to:
- Provide collateral that is acceptable to the Pension Benefit Guaranty Corp., the government-sponsored enterprise that insures many U.S. employers' defined benefit pension plans;
- Make plan contributions, based on a schedule that was whited out in the published version of the letter,
- Send proof of the contribution payments to Chris Huxtable, an IRS official in Richmond, Virginia, and to the Corporate Finance & Restructuring team at the PBGC.
The Context
The new letter is similar to letters Laufer sent in December 2020 and April 2021.
