Instructions For Form 5330 - Internal Revenue Service (Page 9 of 12) in pdf

received by the fiduciary adviser for

Section 214 of the Pension

Part VI (Section 4971(a) and

investment advice or with respect to the

Protection Act of 2006 provides that, for

(b))

sale, holding, or acquisition of any

certain tax years ending after August

security or other property for the

17, 2006, a multiemployer pension plan

Tax on Failure To Meet

investment of plan assets do not vary

with (1) less than 100 participants, (2)

Minimum Funding Standards

depending on the basis of any

an annual normal cost of less than

investment option selected, or

Section 4971(a) imposes a 10% tax

$100,000, and (3) a funding deficiency

•

Uses a computer model under an

(5% for multiemployer plans) on the

on August 17, 2006, will not incur the

investment advice program, described

excise tax for an accumulated funding

amount of the accumulated funding

in section 4975(f)(8)(C), in connection

deficiency determined as of the end of

deficiency if its employers participated

with investment advice provided by a

the plan year.

in a Federal Fishery Capacity

fiduciary adviser to a participant or

Reduction Program and the Northeast

If a plan fails to meet the funding

beneficiary.

Fisheries Assistance Program.

requirements of section 412, the

Additionally, the eligible investment

employer and all controlled group

Part VII (Section 4977)

advice arrangement must meet the

members will be subject to the excise

provisions of section 4975(f)(8)(D), (E),

taxes under section 4971(a) and (b).

Tax on Excess Fringe Benefits

(F), (G), (H), and (I).

Except in the case of a

If you made an election to be taxed

For purposes of the statutory

multiemployer plan, all members of a

under section 4977 to continue your

exemption on investment advice, a

controlled group are jointly and

nontaxable fringe benefit policy that

fiduciary adviser is defined in section

severally liable for this tax. A controlled

was in existence on or after January 1,

4975(f)(8)(J).

group in this case means a controlled

1984, check the “Yes” box on line 30a

group of corporations (section 414(b)),

Correcting certain prohibited

and complete lines 30b through 30d.

a group of trades or businesses under

transactions. Generally, if a

Line 30c. The excess fringe benefits

common control (section 414(c)), an

disqualified person enters into a direct

are figured by subtracting 1% of the

affiliated service group (section

or indirect prohibited transaction (listed

aggregate compensation paid by you to

414(m)), and any other group treated

in items 1 through 4 below) in

your employees during the calendar

as a single employer under section

connection with the acquisition, holding,

year that was includable in their gross

414(o).

or disposition of certain securities or

income from the aggregate value of the

commodities, and the transaction is

nontaxable fringe benefits under

If the IRS determined at any time

corrected within the correction period, it

sections 132(a)(1) and 132(a)(2).

that your plan was a plan as defined in

will not be treated as a prohibited

Part IV (section 4975), it will always

Part VIII (Section 4979)

transaction and no tax will be

remain subject to the excise tax on

assessed.

failure to meet minimum funding

Tax on Excess Contributions to

1. Sale or exchange, or leasing of

standards.

Certain Plans

any property between a plan and a

Line 28. If your plan has an

disqualified person.

accumulated funding deficiency as

Section 4979. Any employer who

2. Lending of money or other

defined in section 412(a) (section 418B

maintains a plan described in section

extension of credit between a plan and

if this is a multiemployer plan in

401(a), 403(a), 403(b), 408(k), or

a disqualified person.

reorganization), complete line 28.

501(c)(18) may be subject to an excise

3. Furnishing of goods, services, or

tax on the excess aggregate

Line 29. Multiply line 28 by the

facilities between a plan and a

contributions made on behalf of highly

applicable tax rate shown below and

disqualified person.

compensated employees. The

enter the result on line 29.

4. Transfer to, or use by or for the

•

employer may also be subject to an

10% for plans (other than

benefit of, a disqualified person of

excise tax on the excess contributions

multiemployer plans), or

income or assets of a plan.

•

to a cash or deferred arrangement

5% for all multiemployer plans.

connected with the plan.

However, if at the time the

Additional tax for failure to correct

The tax is on the excess

transaction was entered into, the

the accumulated funding deficiency.

contributions and the excess aggregate

disqualified person knew or had reason

When an initial tax is imposed by

contributions made to or on behalf of

to know that the transaction was

section 4971(a) on an accumulated

the highly compensated employees (as

prohibited, the transaction would be

funding deficiency and the accumulated

defined in section 414(q)).

subject to the tax on prohibited

funding deficiency is not corrected

transactions.

A highly compensated employee

within the taxable period, an additional

generally is an employee who:

tax equal to 100% of the accumulated

For purposes of section 4975(d)(23)

funding deficiency to the extent not

1. Was a 5-percent owner at any

the term correct means to:

•

corrected is imposed by section

time during the year or the preceding

Undo the transaction to the extent

4971(b).

year, or

possible and in all cases to make good

2. For the preceding year had

to the plan or affected account any

The taxable period is the period

compensation from the employer in

losses resulting from the transaction,

beginning with the end of the plan year

excess of a dollar amount for the year

and

where there is an accumulated funding

•

($100,000 for 2006 and for 2007) and,

Restore to the plan or affected

deficiency and ending on the earlier of:

•

if the employer so elects, was in the

account any profits made through the

The date the notice of deficiency for

top-paid group for the preceding year.

use of assets of the plan.

the section 4971(a) excise tax is

mailed, or

The correction period is the 14-day

An employee is in the top-paid group

•

The date the section 4971(a) excise

period beginning on the date on which

for any year if the employee is in the

tax is assessed.

the disqualified person discovers or

group consisting of the top 20% of the

reasonably should have discovered that

Report the tax for failure to correct

employees of the employer when

the transaction constitutes a prohibited

the accumulated funding deficiency on

ranked on the basis of compensation

transaction.

line 7b.

paid. An employee (who is not a 5%

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Instructions For Form 5330 - Internal Revenue Service Page 9

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