Instructions For Form 5330 - Internal Revenue Service (Page 11 of 13) in pdf

if the employer so elects, was in the

employer from a qualified plan. For

amendment (starting in plan years

top-paid group for the preceding year.

exceptions to this definition, see section

beginning after December 31, 2007, the

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

requirement to give notice is extended

An employee is in the top-paid group

to an employer who has an obligation

A qualified plan is:

for any year if the employee is in the

•

to contribute to a multiemployer plan).

Any plan meeting the requirements of

group consisting of the top 20% of the

Whether a participant, alternate

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

employees of the employer when

plan maintained by an employer if that

payee or an employer, as described in

ranked on the basis of compensation

the above paragraph, is an applicable

employer has at all times been exempt

paid. An employee (who is not a 5%

individual is determined on a typical

from federal income tax, or

owner) who has compensation in

•

business day that is reasonably

A governmental plan within the

excess of $100,000 is not a highly

meaning of section 414(d).

approximate to the time the section

compensated employee if the employer

204(h) notice is provided (or at the

Terminated defined benefit plan.

elects the top-paid group limitation and

latest date for providing section 204(h)

If a defined benefit plan is terminated,

the employee is not a member of the

notice, if earlier), based on all relevant

and an amount in excess of 25% of the

top-paid group.

facts and circumstances. For more

maximum amount otherwise available

The excess contributions subject to

information in determining whether an

for reversion is transferred from the

the section 4979 excise tax are equal to

individual is a participant or alternate

terminating defined benefit plan to a

the amount by which employer

payee, see Regulations section

defined contribution plan, the amount

contributions actually paid over to the

54.4980F-1, Q&A 10.

transferred is not treated as an

trust exceed the employer contributions

The noncompliance period is the

employer reversion for purposes of

that could have been made without

period beginning on the date the failure

section 4980. However, the amount the

violating the special nondiscrimination

first occurs and ending on the date the

employer receives is subject to the 20%

requirements of section 401(k)(3) or

excise tax. For additional information,

notice of the failure is provided or the

section 408(k)(6) in the instance of

failure is corrected.

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

certain SEPs.

291.

Exceptions. Section 4980F excise

The excess aggregate contributions

tax will not be imposed for a failure

Lines 1 through 4. If you owe the

subject to the section 4979 excise tax

during any period in which:

section 4980 tax, enter the date of the

are equal to the amount by which the

reversion on line 1. Enter the reversion

1. Any person subject to liability for

aggregate matching contributions of the

amount on line 2a, and the applicable

the tax did not know that the failure

employer and the employee

excise tax rate on line 2b. If you use a

existed and exercised reasonable

contributions (and any qualified

tax percentage other than 50% on line

diligence to meet the notice

nonelective contribution or elective

2b, explain on line 4 why you qualify to

requirement. A person is considered to

contribution taken into account in

use a rate other than 50%.

have exercised reasonable diligence,

computing the contribution percentage

but did not know the failure existed,

under section 401(m)) actually made on

Include on line 3 and Part I, Section

only if:

behalf of the highly compensated

D, line 14 the section 4980 tax on

employees for each plan year exceed

employer reversions from a qualified

a. The responsible person exercised

the maximum amount of the

plan.

reasonable diligence in attempting to

contributions permitted in the

deliver section 204(h) notice to

Schedule J (Section 4980F)

contribution percentage computation

applicable individuals by the latest date

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

permitted. Generally, the section 204(h)

Tax on Failure to Provide

notice must be provided at least 45

However, there is no excise tax

Notice of Significant Reduction

days before the effective date of the

liability if the excess contributions or the

section 204(h) amendment. For

in Future Accruals

excess aggregate contributions and any

exceptions to this rule, see Regulations

income earned on the contributions are

Section 4980F imposes on an employer

section 54.4980F-1, Q&A 9.

distributed (or, if forfeitable, forfeited) to

(or, in the case of a multiemployer plan,

b. At the latest date permitted for

the participants for whom the excess

the plan) an excise tax of $100 per day

delivery of section 204(h) notice, the

contributions were made within 2

per each applicable individual and each

person reasonably believes that section

months after the end of the plan year.

employee organization representing

204(h) notice was actually delivered to

participants who are applicable

Schedule I (Section 4980)

each applicable individual by that date.

individuals for each day of the

2. Any person subject to liability for

noncompliance period for the failure to

Tax on Reversion of Qualified

the tax exercised reasonable diligence

give notice of plan amendments that

to meet the notice requirement and

Plan Assets to an Employer

provide for a significant reduction in the

corrects the failure within 30 days after

rate of future benefit accrual or the

Section 4980 imposes an excise tax on

the employer (or other person

elimination or significant reduction of an

an employer reversion of qualified plan

responsible for the tax) knew, or

early retirement benefit or retirement-

assets to an employer. Generally, the

exercising reasonable diligence would

type subsidy. This notice is called a

reversion excise tax is 20% of the

have known, that the failure existed.

section 204(h) notice because section

amount of the employer reversion. The

204(h) of ERISA has parallel notice

excise tax rate is increased to 50% if

If the person subject to liability for

requirements.

the employer does not (1) establish or

the excise tax exercised reasonable

maintain a qualified replacement plan

An applicable individual is a

diligence to meet the notice

following the plan termination or (2)

participant in the plan, or an alternate

requirement, the total excise tax

provide certain pro-rata benefit

payee of a participant under a qualified

imposed during a tax year of the

increases in connection with the plan

domestic relations order, whose rate of

employer will not exceed $500,000.

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

future benefit accrual (or early

Furthermore, in the case of a failure

or (B) for more information.

retirement benefit or retirement-type

due to reasonable cause and not to

An employer reversion is the amount

subsidy) under the plan may

willful neglect, the Secretary of the

of cash and the FMV of property

reasonably be expected to be

Treasury is authorized to waive the

received, directly or indirectly, by an

significantly reduced by a plan

excise tax to the extent that the

-11-

Instructions For Form 5330 - Internal Revenue Service Page 11

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