Instructions For Form 5330 - Internal Revenue Service (Page 10 of 12) in pdf

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owner) who has compensation in

A governmental plan within the

earlier), based on all relevant facts and

excess of $100,000 is not a highly

meaning of section 414(d).

circumstances. For more information in

compensated employee if the employer

determining whether an individual is a

Terminated defined benefit plan.

elects the top-paid group limitation and

participant or alternate payee, see

If a defined benefit plan is terminated,

the employee is not a member of the

Regulations section 54.4980F-1, Q&A

and an amount in excess of 25% of the

top-paid group.

10.

maximum amount otherwise available

The excess contributions subject to

for reversion is transferred from the

The noncompliance period is the

the section 4979 excise tax are equal to

terminating defined benefit plan to a

period beginning on the date the failure

the amount by which employer

defined contribution plan, the amount

first occurs and ending on the date the

contributions actually paid over to the

transferred is not treated as an

notice of the failure is provided or the

trust exceed the employer contributions

employer reversion for purposes of

failure is corrected.

that could have been made without

section 4980. However, the amount the

violating the special nondiscrimination

employer receives is subject to the 20%

Exceptions. Section 4980F excise

requirements of section 401(k)(3).

excise tax. For additional information,

tax will not be imposed for a failure

see Rev. Rul. 2003-85, 2003-32 I.R.B.

The excess aggregate contributions

during any period in which:

291.

subject to the section 4979 excise tax

1. Any person subject to liability for

are equal to the amount by which the

Lines 32 through 35. If you owe the

the tax did not know that the failure

aggregate matching contributions of the

section 4980 tax, enter the date of the

existed and exercised reasonable

employer and the employee

reversion on line 32. Enter the

diligence to meet the notice

contributions (and any qualified

reversion amount on line 33a, and the

requirement. A person is considered to

nonelective contribution or elective

applicable excise tax rate on line 33b. If

have exercised reasonable diligence,

contribution taken into account in

you use a tax percentage other than

but did not know the failure existed,

computing the contribution percentage

50% on line 33b, explain on line 35 why

only if:

under section 401(m)) actually made on

you qualify to use a rate other than

a. The responsible person exercised

behalf of the highly compensated

50%.

reasonable diligence in attempting to

employees for each plan year exceed

Include on line 34 and Part I, line 10

the maximum amount of the

deliver section 204(h) notice to

the section 4980 tax on employer

contributions permitted in the

applicable individuals by the latest date

reversions from a qualified plan.

contribution percentage computation

permitted. Generally, the section 204(h)

under section 401(m)(2)(A).

notice must be provided at least 45

Part X (Section 4980F)

days before the effective date the

However, there is no excise tax

section 204(h) amendments take effect.

liability if the excess contributions or the

Tax on Failure to Provide

For exceptions to this rule see

excess aggregate contributions and any

Notice of Significant Reduction

Regulations section 54.4980F-1, Q&A

income earned on the contributions are

in Future Accruals

distributed (or, if forfeitable, forfeited) to

b. At the latest date permitted for

the participants for whom the excess

Section 4980F imposes on an employer

delivery of section 204(h) notice, the

contributions were made within 2

(or, in the case of a multiemployer plan,

months after the end of the plan year.

the plan) an excise tax of $100 per day

person reasonably believes that section

per each applicable individual and each

204(h) notice was actually delivered to

Part IX (Section 4980)

employee organization representing

each applicable individual by that date.

participants who are applicable

2. Any person subject to liability for

Tax on Reversion of Qualified

individuals for each day of the

the tax exercised reasonable diligence

Plan Assets to an Employer

noncompliance period for the failure to

to meet the notice requirement and

give notice of plan amendments that

corrects the failure within 30 days after

Section 4980 imposes an excise tax on

provide for a significant reduction in the

the employer (or other person

an employer reversion of qualified plan

rate of future benefit accrual or the

responsible for the tax) knew, or

assets to an employer. Generally, the

elimination or significant reduction of an

reversion excise tax is 20% of the

exercising reasonable diligence would

early retirement benefit or retirement-

amount of the employer reversion. The

have known, that the failure existed.

type subsidy. This notice is called a

excise tax rate is increased to 50% if

section 204(h) notice because the

the employer does not (1) establish or

If the person subject to liability for

same notice requirement appears at

maintain a qualified replacement plan

the excise tax exercised reasonable

section 204(h) of ERISA.

following the plan termination or (2)

diligence to meet the notice

provide certain pro-rata benefit

An applicable individual is a

requirement, the total excise tax

increases in connection with the plan

participant in the plan, or an alternate

imposed during a tax year of the

termination. See section 4980(d)(1)(A)

payee of a participant under a qualified

employer will not exceed $500,000.

or (B) for more information.

domestic relations order, whose rate of

Furthermore, in the case of a failure

future benefit accrual (or early

An employer reversion is the amount

due to reasonable cause and not to

retirement benefit or retirement-type

of cash and the FMV of property

willful neglect, the Secretary of the

subsidy) under the plan may

received, directly or indirectly, by an

Treasury is authorized to waive the

reasonably be expected to be

employer from a qualified plan. For

excise tax to the extent that the

significantly reduced.

exceptions to this definition, see section

payment of the tax would be excessive

4980(c)(2)(B) and section 4980(c)(3).

relative to the failure involved. See Rev.

Whether a participant or alternate

Proc. 2007-4, 2007-1 I.R.B. 118 for

payee is an applicable individual is

A qualified plan is:

•

procedures to follow in applying for a

determined on a typical business day

Any plan meeting the requirements of

waiver of part or all of the excise tax

that is reasonably approximate to the

section 401(a) or 403(a), other than a

due to reasonable cause. You can find

time the section 204(h) notice is

plan maintained by an employer if that

Rev. Proc. 2007-4 at

employer has at all times been exempt

provided (or at the latest date for

from federal income tax, or

providing section 204(h) notice, if

irs-irbs/irb07-01.pdf.

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Instructions For Form 5330 - Internal Revenue Service Page 10

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