Ea-2F - General Rules Of Minimum Funding

Front 1

The minimum funding requirement for years beginning in 2008 and later is:

Back 1

- The minimum required contribution determined under IRC section 430 for single employer plans.

-The amount necessary to avoid a funding deficiency under IRC section 431 for multiemployer plans.

Front 2

The contributions must generally be made by the sponsoring employer.

Back 2

- For employers that are part of a controlled group, each employer in the controlled group may be held liable for contributions not made by other members of the group.

- Multiemployer plans in critical status under IRC section 432 may not be held liable for required contributions if the plan adopts and complies with rehabilitation requirements under IRC section 432(e).

Front 3

Funding deficiencies

Back 3

- For a single employer plan, under IRC section 430, a funding deficiency (or the portion of the funding deficiency to be waived) is determined as of the valuation date.

- For a multiemployer plan, under IRC section 431, or for single employer plans prior to 2008, a funding deficiency (or the portion of the funding deficiency to be waived) is determined as of the last day of the plan year.

Front 4

Waiver of minimum funding

Back 4

o All or part of the minimum funding standards may be waived by the IRS upon application by the employer.

- The IRS cannot waive the minimum funding standard for more than 3 out of any 15 consecutive years for single employer plans (or multiple employer plans).

- The IRS cannot waive the minimum funding standard for more than 5 out of any 15 consecutive years for multiemployer plans.

oThe waiver is amortized under the rules of IRC section 430 for single employer plans and IRC section 431 for multiemployer plans.

- The amortization of the waived deficiency cannot be waived in a

subsequent year.

Front 5

The waiver can only be granted in the case

Back 5

of business hardship.

Front 6

Waiver granted - In the case of a single employer plan

Back 6

this must be a temporary substantial business hardship. This applies to each member of the

controlled group.

Front 7

Waiver granted - In the case of a multiemployer plan,

Back 7

10% or more of the employers contributing to the plan must have a substantial business hardship based on the following factors:

The employer is operating at an economic loss.

There is substantial unemployment in the industry.

The sales and profits within the industry are depressed or declining.

It is reason able to expect that the plan will continue only if the waiver is granted.

Front 8

Waiver of min funding - Special rules for single employer plans

Back 8

The application for the waiver must be submitted no later than 21⁄2 months after the end of the plan year.

Security against the waiver may be required by the IRS.
-The security is not required if the unpaid minimum required contribution plus the outstanding balance of prior waivers is less than

$1,000,000.

Front 9

Waiver of min funding - The plan cannot be amended to increase benefit liabilities while a waiver is in

effect, unless

Back 9

the amendment only provides for a de minimis increase in the

liabilities.

Front 10

Changes in the plan year or funding method must be

Back 10

approved by the IRS.

Front 11

Plan Amendments - Plan amendments adopted on or before the valuation date and effective at any time during the plan year must

Back 11

be used to determine valuation results.

Front 12

Plan Amendments - Plan amendments adopted after the valuation date (and no later than 21⁄2 months after the end of the plan year for single employer plans – 2 years for multiemployer plans)

Back 12

can be used to determine valuation results at the election of the plan sponsor.

Front 13

Short plan years - The minimum funding requirement is generally

Back 13

pro-rated for a short year.

Note that the target normal cost for a single employer plan is not pro- rated for a short plan year. The target normal cost is based upon the

increase in the accrued benefit for the short year.

Front 14

Short plan years - For plans terminating before the end of the plan year

Back 14

the minimum funding requirement is pro-rated as if the plan year is a short year. However, the plan year remains the same, and the minimum funding and Schedule B filing deadlines remain as they would be for a full plan year. See Revenue Ruling 79- 237.

Front 15

Minimum funding rules do not apply to:

Back 15

o Government plans.

o Church plans.
o Insurance contract plans, funded exclusively through insurance contracts that

provide for level annual premium payments.