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Instructions For Form 5330 5330 - Official Federal Forms
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Instructions for Form 5330 (Rev. April 2009) Return of Excise Taxes Related to Employee Benefit Plans Section references are to the Internal Revenue Code unless otherwise noted. Department of the Treasury Internal Revenue Service General Instructions Reminders Section 4965 -- Prohibited Tax Shelter Transactions. The Tax Increase Prevention and Reconciliation Act of 2005 provides that an entity manager of a tax-exempt organization may be subject to an excise tax on prohibited tax shelter transactions under section 4965. In the case of a plan entity, an entity manager is any person that approves or otherwise causes the tax-exempt entity to be a party to a prohibited tax shelter transaction. The excise tax is $20,000 and is assessed for each approval or other act causing the organization to be a party to the prohibited tax shelter transaction. Section 4971 -- Failure to Meet the Minimum Funding Standards. Section 214 of the Pension Protection Act of 2006 provides that, for certain tax years, a multiemployer pension plan with (1) less than 100 participants, (2) an annual normal cost of less than $100,000, and (3) a funding deficiency on August 17, 2006, will not incur the excise tax for an accumulated funding deficiency under section 4971(a)(2) if the employers participated in a Federal Fishery Capacity Reduction Program and the Northeast Fisheries Assistance Program. Section 4971(g) -- Multiemployer Plans in Endangered or Critical Status The Pension Protection Act of 2006 states that a failure to comply with a funding improvement or rehabilitation plan, a failure to meet requirements for plans in endangered or critical status, or a failure to adopt a rehabilitation plan may be subject to an excise tax. Section 4972 -- Nondeductible Contributions to Qualified Employer Plans. The deduction limits of section 404(a)(1)(D) were altered for certain tax years beginning after December 31, 2005. The maximum deductible amount is not less than the excess of 150% of a plan's current liability in the instance of a single-employer defined benefit plan (140% for multiemployer plans) over the value of that plan's assets. Where an employer contributes to one or more defined contribution plans, the overall limit applicable to combinations of defined benefit plans and defined contribution plans only applies to the extent that the contributions exceed 6% of the compensation otherwise paid or accrued during the tax year to the beneficiaries under the defined contribution plans. For purposes of determining the excise tax on nondeductible contributions, matching contributions to a defined contribution plan that are nondeductible solely because of the overall deduction limit are disregarded. In addition, where there is a combination of defined benefit and defined contribution plans, multiemployer plans are not taken into consideration in applying the overall limit on deductions. Section 4975 -- Prohibited Transactions. Generally, for purposes of a prohibited transaction described in section 4975(c)(1)(A), (B), (C), or (D), if a disqualified person enters into a prohibited transaction in connection with the acquisition, holding, or disposition of certain securities or commodities, and the transaction is corrected within the 14-day correction period, it will not be treated as a prohibited transaction and no tax will be assessed. When calculating the prohibited transaction excise tax where there is a failure to transmit participant contributions (elective deferrals) or amounts that would have otherwise been payable to the participant in cash, the amount involved is based on interest on those elective deferrals. See Rev. Rul. 2006-38, 2006-29 I.R.B. 80, available at www.irs.gov/irb/ 2006-29_IRB/ar06.html. Generally, the prohibited transaction rules of section 4975(c) will not apply to any transaction in connection with investment advice, if the investment advice provided by a fiduciary adviser is provided under an eligible investment advice arrangement under Department of Labor guidelines. · A minimum funding deficiency (section 4971(a) and (b)); · A failure to pay liquidity shortfall (section 4971(f)); · A failure to comply with a funding improvement or rehabilitation plan (section 4971(g)(2)); · A failure to meet requirements for plans in endangered or critical status (section 4971(g)(3)); · A failure to adopt rehabilitation plan (section 4971(g)(4)); · Nondeductible contributions to qualified plans (section 4972); · Excess contributions to a section 403(b)(7)(A) custodial account (section 4973(a)(3)); · A prohibited transaction (section 4975); · A disqualified benefit provided by funded welfare plans (section 4976); · Excess fringe benefits (section 4977); · Certain employee stock ownership plan (ESOP) dispositions (section 4978); · Excess contributions to plans with cash or deferred arrangements (section 4979); · Certain prohibited allocations of qualified securities by an ESOP (section 4979A); · Reversions of qualified plan assets to employers (section 4980); · A failure of an applicable plan reducing future benefit accruals to satisfy notice requirements (section 4980F). Who Must File A Form 5330 must be filed by any of the following. 1. A plan entity manager of a tax-exempt entity who approves, or otherwise causes the entity to be party to, a prohibited tax shelter transaction during the tax year and knows or has reason to know the transaction is a prohibited tax shelter transaction under section 4965(a)(2). 2. An employer liable for the tax under section 4971 for failure to meet the minimum funding standards under section 412 (liability for tax in the case of an employer who is a party to a collective bargaining agreement). See section 413(b)(6). 3. An employer liable for the tax under section 4971(f) for a failure to Purpose of Form File Form 5330 to report the tax on: · A prohibited tax shelter transaction (section 4965(a)(2)); Cat. No. 11871X meet the liquidity requirement of section 412(m)(5). 4. An employer with respect to a multiemployer plan liable for the tax under section 4971(g)(2) for failure to comply with a funding improvement or rehabilitation plan under section 432. 5. An employer with respect to a multiemployer plan liable for the tax under section 4971(g)(3) for failure to meet the requirements for plans in endangered or critical status under section 432. 6. A multiemployer plan sponsor liable for the tax under section 4971(g)(4) for failure to adopt a rehabilitation plan within the
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