Instructions For Form 5330 - Internal Revenue Service (Page 9 of 13) in pdf

When a loan from a qualified

attach a statement fully explaining the

subject to the tax on prohibited

TIP

plan that is a prohibited

correction and identifying persons

transactions.

transaction spans successive

involved in the prohibited transaction.

For purposes of section 4975(d)(23)

tax years, and thus constitutes multiple

the term correct means to:

Prohibited Transactions and

•

prohibited transactions, and during

Undo the transaction to the extent

Investment Advice

those years the first tier prohibited

possible and in all cases to make good

transaction excise tax rate changes, the

For financial investment advice

to the plan or affected account any

first tier excise tax liability for each

provided after December 31, 2006, the

losses resulting from the transaction,

prohibited transaction is the sum of the

prohibited transaction rules of section

and

•

products resulting from multiplying the

4975(c) will not apply to any transaction

Restore to the plan or affected

amount involved for each year in the

in connection with investment advice, if

account any profits made through the

taxable period for that prohibited

the investment advice provided by a

use of assets of the plan.

transaction by the excise tax rate in

fiduciary adviser is provided under an

The correction period is the 14-day

effect at the beginning of that taxable

eligible investment advice arrangement.

period beginning on the date on which

period. For more information see Rev.

For this purpose an eligible

the disqualified person discovers or

Rul. 2002-43, 2002-2 I.R.B. 85. Unlike

investment advice arrangement is an

reasonably should have discovered that

the previous example, the example in

arrangement which either:

the transaction constitutes a prohibited

Rev. Rul. 2002-43 contains unpaid

•

Provides that any fees (including any

transaction.

interest.

commission or other compensation)

Schedule D (Section 4971(a)

Additional tax for failure to correct

received by the fiduciary adviser for

the prohibited transaction (Section

and (b))

investment advice or with respect to the

4975(b)). To avoid liability for

sale, holding, or acquisition of any

additional taxes and penalties, and in

security or other property for the

Tax on Failure To Meet

some cases further initial taxes, a

investment of plan assets do not vary

Minimum Funding Standards

correction must be made within the

depending on the basis of any

Section 4971(a) imposes a 10% tax

taxable period. The term correction is

investment option selected, or

(5% for multiemployer plans) on the

•

defined as undoing the prohibited

Uses a computer model under an

amount of the accumulated funding

transaction to the extent possible, but in

investment advice program, described

deficiency determined as of the end of

any case placing the plan in a financial

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

the plan year.

position not worse than that in which it

with investment advice provided by a

would be if the disqualified person were

If a plan fails to meet the funding

fiduciary adviser to a participant or

acting under the highest fiduciary

requirements of section 412, the

beneficiary.

standards.

employer and all controlled group

Additionally, the eligible investment

members will be subject to the excise

advice arrangement must meet the

If the prohibited transaction is not

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

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

corrected within the taxable period, an

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

additional tax equal to 100% of the

Except in the case of a

multiemployer plan, all members of a

amount involved will be imposed under

For purposes of the statutory

controlled group are jointly and

section 4975(b). Any disqualified

exemption on investment advice, a

severally liable for this tax. A controlled

person who participated in the

fiduciary adviser is defined in section

group in this case means a controlled

prohibited transaction (other than a

4975(f)(8)(J).

group of corporations (section 414(b)),

fiduciary acting only as such) must pay

Correcting certain prohibited

a group of trades or businesses under

this tax imposed by section 4975(b).

transactions. Generally, if a

common control (section 414(c)), an

Report the additional tax on line 3b of

disqualified person enters into a direct

Section A, Form 5330.

affiliated service group (section

or indirect prohibited transaction (listed

414(m)), and any other group treated

Line 4. If the “No” box is checked on

in items 1 through 4 below) in

as a single employer under section

line 4, there has not been a correction

connection with the acquisition, holding,

414(o).

of all of the prohibited transactions by

or disposition of certain securities or

If the IRS determined at any time

the end of the tax year for which this

commodities, and the transaction is

that your plan was a plan as defined in

Form 5330 is being filed. Attach a

corrected within the correction period, it

Schedule C (section 4975), it will

statement indicating when the

will not be treated as a prohibited

always remain subject to the excise tax

correction has been or will be made.

transaction and no tax will be

on failure to meet minimum funding

assessed.

Schedule C(continued)

standards.

1. Sale or exchange, or leasing of

Line 1. If your plan has an

Schedule of Other Participating

any property between a plan and a

accumulated funding deficiency as

disqualified person.

Disqualified Persons and

defined in section 412(a) (section 418B

2. Lending of money or other

Description of Correction

if this is a multiemployer plan in

extension of credit between a plan and

reorganization), complete line 1.

If more than one disqualified person

a disqualified person.

participated in the same prohibited

Line 2. Multiply line 1 by the

3. Furnishing of goods, services, or

transaction, list on this schedule the

applicable tax rate shown below and

facilities between a plan and a

name, address, and social security

enter the result on line 2.

disqualified person.

•

number or employer identification

10% for plans (other than

4. Transfer to, or use by or for the

number of each disqualified person,

multiemployer plans), or

benefit of, a disqualified person of

•

other than the disqualified person who

5% for all multiemployer plans.

income or assets of a plan.

files this return.

Additional tax for failure to correct

Line 5. For all transactions complete

However, if at the time the

the accumulated funding deficiency.

columns (a), (b), and (c). If the

transaction was entered into, the

When an initial tax is imposed by

transaction has been corrected,

disqualified person knew or had reason

section 4971(a) on an accumulated

complete columns (a) through (e). If

to know that the transaction was

funding deficiency and the accumulated

additional space is needed you may

prohibited, the transaction would be

funding deficiency is not corrected

-9-

Instructions For Form 5330 - Internal Revenue Service Page 9

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