Instructions For Form 5330 - Internal Revenue Service

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Department of the Treasury
Instructions for Form 5330
Internal Revenue Service
(Rev. March 2007)
Return of Excise Taxes
Related to Employee Benefit Plans
Section references are to the Internal
amounts that would have otherwise
Excess contributions to a section
been payable to the participant in cash,
403(b)(7)(A) custodial account (section
Revenue Code unless otherwise noted.
the amount involved is based on
4973(a)(3)).
General Instructions
interest on those elective deferrals. See
A prohibited transaction (section
Rev. Rul. 2006-38.
4975).
What’s New
A disqualified benefit provided by
Generally, for financial investment
funded welfare plans (section 4976).
advice provided after December 31,
Excess fringe benefits (section
Section 4965, Prohibited Tax Shelter
2006, the prohibited transaction rules of
4977).
Transactions. For tax years beginning
section 4975(c) will not apply to any
Certain ESOP dispositions (sections
after May 17, 2006, the Tax Increase
transaction in connection with
4978 and 4978A).
Prevention and Reconciliation Act of
investment advice, if the investment
Excess contributions to plans with
2005 provides that an entity manager of
advice provided by a fiduciary adviser is
cash or deferred arrangements (section
a tax-exempt organization may be
provided under an eligible investment
4979).
subject to an excise tax on prohibited
advice arrangement under Department
Certain prohibited allocations of
tax shelter transactions under section
of Labor guidelines.
qualified securities by an ESOP
4965. In the case of a plan entity, an
(section 4979A).
entity manager is any person that
Reversions of qualified plan assets to
approves or otherwise causes the
Section 4972, Nondeductible
employers (section 4980).
tax-exempt entity to be a party to a
Contributions to Qualified Employer
A failure to pay liquidity shortfall
prohibited tax shelter transaction. The
Plans. The deduction limits of section
(section 4971(f)).
excise tax is $20,000 and is assessed
404(a)(1)(D) were altered for certain tax
A failure of applicable plans reducing
for each approval or other act causing
years beginning after December 31,
future benefit accruals to satisfy notice
the organization to be a party to the
2005. The maximum deductible amount
requirements (section 4980F).
prohibited tax shelter transaction.
is not less than the excess of 150% of a
plan’s current liability in the instance of
Who Must File
a single-employer defined benefit plan
Section 4971, Failure to Meet the
A Form 5330 must be filed by:
(140% for multiemployer plans) over
Minimum Funding Standards.
the value of that plan’s assets. Where
1. Any plan entity manager of a
Section 214 of the Pension Protection
an employer contributes to one or more
tax-exempt entity who approves the
Act of 2006 provides that, for certain
defined contribution plans, the overall
entity as a party to, or otherwise causes
tax years, a multiemployer pension plan
limit applicable to combinations of
the entity to be a party to, a prohibited
with (1) less than 100 participants, (2)
defined benefit plans and defined
tax shelter transaction during the tax
an annual normal cost of less than
contribution plans only applies to the
year and knows or has reason to know
$100,000, and (3) a funding deficiency
extent that the contributions exceed 6%
the transaction is a prohibited tax
on August 17, 2006, will not incur the
of the compensation otherwise paid or
shelter transaction, see section
excise tax for an accumulated funding
accrued during the tax year to the
4965(a)(2).
deficiency under section 4971(a)(2) if
beneficiaries under the defined
2. Any employer who is liable for the
the employers participated in a Federal
contribution plans. For purposes of
tax under section 4971 for failure to
Fishery Capacity Reduction Program
determining the excise tax on
meet the minimum funding standards
and the Northeast Fisheries Assistance
nondeductible contributions, matching
under section 412 (liability for tax in the
Program.
contributions to a defined contribution
case of an employer who is a party to a
plan that are nondeductible solely
collective bargaining agreement, see
Section 4975, Prohibited
because of the overall deduction limit
section 413(b)(6)).
Transactions. Generally, for purposes
are disregarded. In addition, where
3. Any employer who is liable for the
of a prohibited transaction described in
there is a combination of defined
tax under section 4971(f) for a failure to
section 4975(c)(1)(A), (B), (C), or (D), if
benefit and defined contribution plans,
meet the liquidity requirement of section
a disqualified person enters into a
multiemployer plans are not taken into
412(m)(5).
prohibited transaction in connection
consideration in applying the overall
4. Any employer who is liable for the
with the acquisition, holding, or
limit on deductions.
tax under section 4972 for nondeduct-
disposition of certain securities, or
ible contributions to qualified plans.
commodities, and the transaction is
5. Any individual who is liable for
Purpose of Form
corrected within the correction period, it
the tax under section 4973(a)(3)
will not be treated as a prohibited
File Form 5330 to report the tax on:
because an excess contribution to a
transaction and no tax will be
A prohibited tax shelter transaction
section 403(b)(7)(A) custodial account
assessed.
(section 4965(a)(2)).
was made for them and that excess
A minimum funding deficiency
When calculating the prohibited
has not been eliminated as specified in
(section 4971(a) and (b)).
transaction excise tax where there is a
sections 4973(c)(2)(A) and (B).
failure to transmit participant
Nondeductible contributions to
6. Any disqualified person who is
contributions (elective deferrals) or
qualified plans (section 4972).
liable for the tax under section 4975 for
Cat. No. 11871X

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