Return of Excise Taxes Related to Employee Benefit Plans

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Instructions for Form 5330

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CUMULATIVE CHANGES
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Instructions for Form 5330

Department of the Treasury
Internal Revenue Service

(Rev. January 2008)
Return of Excise Taxes
Related to Employee Benefit Plans
Section references are to the Internal
Revenue Code unless otherwise noted.

General Instructions
What’s New
Section 4971(g), Multiemployer Plans
in Endangered or Critical Status. For
years beginning after 2007, 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.

Reminders

moved prior version's
What's New to Reminders

Section 4965, Prohibited Tax Shelter
Transactions. For tax years
beginning after May 17, 2006, 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 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.
Generally, for financial investment
advice provided after December 31,
2006, 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.
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
Cat. No. 11871X

consideration in applying the overall
limit on deductions.
placed list in numerical order

Purpose of Form
File Form 5330 to report the tax on:
• A prohibited tax shelter transaction
(section 4965(a)(2)).
• 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 ESOP dispositions (section
deleted repealed 4978A
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:
1. Any plan entity manager of a
tax-exempt entity who approves the
entity as a party to, or otherwise causes
the entity to be a 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, see section
4965(a)(2).
2. Any employer who is liable for the
tax under section 4971 for failure to
meet the minimum funding standards

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Instructions for Form 5330

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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. Any employer who is liable for the
tax under section 4971(f) for a failure to
meet the liquidity requirement of section
412(m)(5).
4. Any employer with respect to a
multiemployer plan who is liable for the
tax under section 4971(g)(2) for failure
to comply with a funding improvement
or rehabilitation plan under section 432.
5. Any employer with respect to a
multiemployer plan who is 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. Any plan sponsor with respect to
a multiemployer plan who is liable for
the tax under section 4971(g)(4) for
failure to adopt a rehabilitation plan
within the time required under section
432.
7. Any employer who is liable for the
tax under section 4972 for nondeductible contributions to qualified plans.
8. Any individual who is liable for
the tax under section 4973(a)(3)
because an excess contribution to a
section 403(b)(7)(A) custodial account
was made for them and that excess
has not been eliminated as specified in
sections 4973(c)(2)(A) and (B).
9. Any disqualified person who is
liable for the tax under section 4975 for
participating in a prohibited transaction
(other than a fiduciary acting only as
such), or an individual (or his or her
beneficiary) who engages in a
prohibited transaction with respect to
his or her individual retirement account
(unless section 408(e)(2)(A) or section
408(e)(4) applies) for each tax year or
part of a tax year in the taxable period
applicable to such prohibited
transaction.
10. Any employer who is liable for the
tax under section 4976 for maintaining
a funded welfare benefit plan that
provides a disqualified benefit during
any tax year.
11. Any employer who pays excess
fringe benefits and has elected to be
taxed under section 4977 on such
payments.
12. Any employer or worker-owned
cooperative (as defined in section
1042(c)(2)) that maintains an ESOP
that disposes of the qualified securities
(as defined in section 1042(c)(1)) within
the specified 3-year period, under
section 4978.
13. Any employer who is liable for the
tax under section 4979 on excess
contributions to plans with a cash or
deferred arrangement, etc.
14. Any employer or worker-owned
cooperative that made the written
statement described in section

664(g)(1)(E) or 1042(b)(3)(B) and made
an allocation prohibited under section
409(n) of qualified securities of an
ESOP taxable under section 4979A or
any employer or worker-owned
cooperative who made an allocation of
S corporation stock of an ESOP
prohibited under section 409(p) taxable
under section 4979A.
15. Any employer who receives an
employer reversion from a deferred
compensation plan that is taxable under
section 4980.
16. Any employer or multiemployer
plan liable for the tax under section
4980F for failure to give notice of a
significant reduction in the rate of future
benefit accrual.

A Form 5330 and tax payment is
required for:
• Each year you fail to meet the
minimum funding standards under
section 412 or contribute an excess
amount to your section 403(b)(7)(A)
custodial account.
• Each year any of the items in 1, 3, 5,
6, 7, or 9 through 14, or 16 under Who
Must File, beginning on page 1, apply.
• Each failure of the employer to make
the required contribution as required by
a funding improvement or rehabilitation
plan under section 432 with respect to
a multiemployer plan.
• A reversion of plan assets from a
qualified plan taxable under section
4980.

Table 1. Excise Tax Due Dates
If the taxes due are
under section . . .

Then, except for section 4965, file Form 5330 by the last day
of the . . . and for section 4965 by the . . .

4965

15th day of the 5th month following the close of the entity
manager’s tax year during which the tax-exempt entity becomes a
party to the transaction.

4971

7th month after the end of the employer’s tax year or 81/2 months
after the last day of the plan year that ends with or within the filer’s
tax year.

4971(f)

7th month after the end of the employer’s tax year or 81/2 months
after the last day of the plan year that ends with or within the filer’s
tax year.

4971(g)(2)

7th month after the end of the employer’s tax year or 81/2 months
after the last day of the plan year that ends with or within the filer’s
tax year.

4971(g)(3)

7th month after the end of the employer’s tax year or 81/2 months
after the last day of the plan year that ends with or within the filer’s
tax year.

4971(g)(4)

7th month after the end of the employer’s tax year or 81/2 months
after the last day of the plan year that ends with or within the filer’s
tax year.

4972

7th month after the end of the tax year of the employer or other
person who must file this return.

4973(a)(3)

7th month after the end of the tax year of the employer or other
person who must file this return.

4975

7th month after the end of the tax year of the employer or other
person who must file this return.

4976

7th month after the end of the tax year of the employer or other
person who must file this return.

4977

7th month after the end of the calendar year in which the excess
fringe benefits were paid to your employees.

4978

7th month after the end of the tax year of the employer or other
person who must file this return.
deleted repealed 4978A

4979

15th month after the close of the plan year to which the excess
contributions or excess aggregate contributions relate.

4979A

7th month after the end of the tax year of the employer or other
person who must file this return.

4980

month following the month in which the reversion occurred.

4980F

month following the month in which the failure occurred.

If the filing due date falls on a Saturday, Sunday, or legal holiday, the return may be filed on the next
business day.

-2deleted reference to sec 133 securities

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Instructions for Form 5330

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• Each year (or part of a year) in the
taxable period applicable to a prohibited
transaction, under section 4975. See
the instructions for Schedule C, line 2,
columns (d) and (e), for a definition of
taxable period.

When To File
File one Form 5330 to report excise
taxes with the same filing due date.
One Form 5330 may be filed to report
one or more of these taxes. However, if
the taxes are from separate plans, file
separate forms for each plan.
Generally, the filing of a Form 5330
starts the statute of limitations running
only with respect to the particular
excise tax(es) reported on that Form
5330. However, statutes of limitations
with respect to the prohibited
transaction excise tax(es) are based on
the filing of the applicable Form 5500.
Use Table 1 to determine the due date
of Form 5330.
Extension. File Form 5558,
Application for Extension of Time to File
Certain Employee Plan Returns, to
request an extension of time to file. If
approved, you may be granted an
extension of up to 6 months after the
normal due date of Form 5330.
Caution: Form 5558 does not extend
the time to pay your taxes. See the
instructions for Form 5558.

Where To File
File Form 5330 with
the: Department of the
Treasury, Internal Revenue
Service Center, Ogden, UT 84201.
Private delivery services. You can
use certain private delivery services
designated by the IRS to meet the
“timely mailing as timely filing/paying”
rule for tax returns and payments.
These private delivery services include
only the following:
• DHL Express (DHL): DHL Same Day
Service, DHL Next Day 10:30 a.m.,
DHL Next Day 12:00 p.m., DHL Next
Day 3:00 p.m., DHL 2nd Day Service.
• Federal Express (FedEx): FedEx
Priority Overnight, FedEx Standard
Overnight, FedEx 2Day, FedEx
International Priority, and FedEx
International First.
• United Parcel Service (UPS): UPS
Next Day Air, UPS Next Day Air Saver,
UPS 2nd Day Air, UPS 2nd Day Air
A.M., UPS Worldwide Express Plus,
and UPS Worldwide Express.
The private delivery service can tell
you how to get written proof of the
mailing date.

Interest is also charged on penalties
imposed for failure to file, negligence,
fraud, gross valuation overstatements,
and substantial understatements of tax
from the due date (including
extensions) to the date of payment. The
interest charge is figured at a rate
determined under section 6621.
Penalty for late filing of return. If
you do not file a return by the due date,
including extensions, you may have to
pay a penalty of 5% of the unpaid tax
for each month or part of a month the
return is late, up to a maximum of 25%
of the unpaid tax. The minimum penalty
for a return that is more than 60 days
late is the smaller of the tax due or
$100. The penalty will not be imposed if
you can show that the failure to file on
time was due to reasonable cause. If
you file late, you must attach a
statement to Form 5330 explaining the
reasonable cause.
Penalty for late payment of tax. If
you do not pay the tax when due, you
may have to pay a penalty of 1/2 of 1%
of the unpaid tax for each month or part
of a month the tax is not paid, up to a
maximum of 25% of the unpaid tax.
The penalty will not be imposed if you
can show that the failure to pay on time
was due to reasonable cause.
Interest and penalties for late filing
and late payment will be billed
separately after the return is filed.

Claim for Refund or Credit/
Amended Return
File an amended Form 5330 for any of
the following:
• To claim a refund of overpaid taxes
reportable on Form 5330;
• For a credit for overpaid taxes; or
• To report additional taxes due within
the same tax year of the filer if those
taxes have the same due date as those
previously reported. Check the box in
item H on page 1 of the return and
report the correct amount of taxes in
Schedule A through K, as appropriate,
and on lines 1 through 16 of Part I. See
instructions for Part II, lines 17 through
19.
If you file an amended return to
claim a refund or credit, the claim must
state in detail the reasons for claiming
the refund. In order for the IRS to
promptly consider your claim, you must
explain why you are filing the claim and
provide the appropriate supporting
evidence. See Regulations section
301.6402-2 for more details.

Interest and Penalties

Specific Instructions

Interest. Interest is charged on taxes
not paid by the due date even if an
extension of time to file is granted.

Filer tax year. Enter the tax year of
the employer, entity, or individual on
whom the tax is imposed.

-3-

Item A. Name and address of filer.
Enter the name and address of the
employer, individual, or other entity who
is liable for the tax.
Include the suite, room, or other unit
numbers after the street number. If the
post office does not deliver mail to the
street address and you have a P.O.
box, show the box number instead of
the street address.
Item B. Filer’s identifying number.
Enter the filer’s identifying number of
the employer, entity, or individual on
whom the tax is imposed. The
identifying number of an individual
(other than a sole proprietor with an
employer identification number (EIN)) is
his or her social security number. The
identifying number of all others is their
EIN.
Item C. Name of plan. Enter the
formal name of the plan, group
insurance arrangement, or enough
information to identify the plan. This
should be the same name indicated on
the Form 5500 series return/report if
required to be filed for the plan.
Item D. Name and address of plan
sponsor. The term plan sponsor
means:
1. The employer, for an employee
benefit plan that a single employer
established or maintains;
2. The employee organization in the
case of a plan of an employee
organization;
3. The association, committee, joint
board of trustees, or other similar group
of representatives of the parties who
establish or maintain the plan, if the
plan is established or maintained jointly
by one or more employers and one or
more employee organizations, or by
two or more employers.
deleted 4th definition

Include the suite, room, or other unit
numbers after the street number. If the
post office does not deliver mail to the
street address and you have a P.O.
box, show the box number instead of
the street address.
Item E. Plan sponsor’s EIN. Enter
the nine-digit EIN assigned to the plan
sponsor. This should be the same
number used to file the Form 5500
series return/report.
Item F. Plan year ending. Plan year
means the calendar or fiscal year on
which the records of the plan are kept.
Enter eight digits in month/date/year
order. This number assists the IRS in
properly identifying the plan and time
period for which the Form 5330 is being
filed. For example, a plan year ended
March 31, 2007, should be shown as
03/31/2007.
Item G. Plan number. Enter the
three-digit number that the employer or
plan administrator assigned to the plan.

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Instructions for Form 5330

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Item H. Amended return. If you are
filing an amended Form 5330, check
the box on this line, and see the
instructions for Part II, lines 17 through
19. Also see Claim for Refund or
Credit/Amended Return.
Filer’s signature. Please sign and
date the form. Also enter a daytime
phone number where you can be
reached.
Preparer’s signature. Anyone who
prepares your return and does not
charge you should not sign your return.
For example, a regular full-time
employee or your business partner who
prepares the return should not sign.
Generally, anyone who is paid to
prepare a return must sign it and fill in
the Paid Preparer’s Use Only area.
The paid preparer must complete the
required preparer information and —
• Sign the return by hand, in the space
provided for the preparer’s signature
(signature stamps and labels are not
acceptable).
• Give a copy of the return to the filer.

Part I — Taxes
Line 4. Section 4976 – Tax on
Disqualified Benefits for Funded
Welfare Plans. Section 4976 imposes
an excise tax on employers who
maintain a funded welfare benefit plan
that provides a disqualified benefit
during any tax year. The tax is 100% of
the disqualified benefit.
Generally, a disqualified benefit is
any of the following:
• Any post-retirement medical benefit
or life insurance benefit provided for a
key employee unless the benefit is
provided from a separate account
established for the key employee under
section 419A(d);
• Any post-retirement medical benefit
or life insurance benefit unless the plan
meets the nondiscrimination
requirements of section 505(b) for
those benefits; or
• Any portion of the fund that reverts to
the benefit of the employer.
Enter on line 4 the total amount of
deleted 4978A
the disqualified benefit.
Line 5a and 5b. Section 4978 – Tax
on Certain ESOP Dispositions.
Section 4978. Section 4978
imposes an excise tax on dispositions
of securities acquired in a sale to which
section 1042 applied, or in a qualified
gratuitous transfer to which section
664(g) applied, if the dispositions take
place within 3 years after the date of
the acquisition of qualified securities (as
defined in section 1042(c)(1) or a
section 664(g) transfer).
The tax is 10% of the amount
realized on the disposition of the
qualified securities if an ESOP or
eligible worker-owned cooperative (as

defined in section 1042(c)(2)) disposes
of the qualified securities within the
3-year period described above, and
either of the following applies:
• The total number of shares held by
that plan or cooperative after the
disposition is less than the total number
of employer securities held immediately
after the sale, or
• Except to the extent provided in
regulations, the value of qualified
securities held by the plan or
cooperative after the disposition is less
than 30% of the total value of all
employer securities as of the
disposition (60% of the total value of all
employer securities in the case of any
qualified employer securities acquired
in a qualified gratuitous transfer to
which section 664(g) applied).

a. Any person related to the
decedent (within the meaning of section
267(b)) or a member of the decedent’s
family (within the meaning of section
2032A(e)(2)), or
b. Any person who, at the time of
the allocation, or at any time during the
1-year period ending on the date of the
acquisition of qualified employer
securities by the plan, is a 5%
shareholder of the employer
maintaining the plan.
3. The accrual or allocation of S
corporation shares in an ESOP during
a nonallocation year constituting a
prohibited allocation under section
409(p).
4. Any synthetic equity owned by a
disqualified person in any nonallocation
year.

See section 4978(b)(2) for the
limitation on the amount of tax.

Prohibited allocations for ESOP or
worker-owned cooperative. For
purposes of items 1 and 2 above, a
prohibited allocation of qualified
securities by any ESOP or eligible
worker-owned cooperative is any
allocation of qualified securities
acquired in a non-recognition-of-gain
sale under section 1042 which violates
section 409(n); and any benefit that
accrues to any person in violation of
section 409(n).
Under section 409(n), an ESOP or
worker-owned cooperative cannot allow
any portion of assets, attributable to
employer securities acquired in a
section 1042 sale, to accrue or be
allocated (directly or indirectly) to the
taxpayer involved in the transaction (or
any person related to the taxpayer)
during the nonallocation period. For
purposes of section 409(n), relationship
to the taxpayer is defined under section
267(b).
The nonallocation period is the
period beginning on the date the
qualified securities are sold and ends
on the later of:
• 10 years after the date of sale; or
• The date on which the final payment
is made if acquisition indebtedness was
incurred at the time of sale.
The employer sponsoring the plan,
or the eligible worker-owned
cooperative, is responsible for paying
the tax.
Prohibited allocations of
securities in an S corporation.

The section 4978 tax must be paid
by the employer or the eligible
worker-owned cooperative that made
the written statement described in
section 1042(b)(3)(B) on dispositions
that occurred during their tax year.
The section 4978 tax does not apply
to a distribution of qualified securities or
sale of such securities if any of the
following occurs:
• The death of the employee;
• The retirement of the employee after
the employee has reached age 591/2;
• The disability of the employee (within
the meaning of section 72(m)(7)); or
• The separation of the employee from
service for any period that results in a
1-year break in service (as defined in
section 411(a)(6)(A)).
For purposes of section 4978, an
exchange of qualified securities in a
reorganization described in section
368(a)(1) for stock of another
corporation will not be treated as a
disposition.
For section 4978 excise taxes,
the amount entered on Part I,
line 5a is the amount realized on
the disposition of qualified securities
multiplied by 10%. Also check the
appropriate box on line 5b.
Line 6. Section 4979A – Tax on
Certain Prohibited Allocations of
Qualified ESOP Securities. Section
4979A imposes a 50% excise tax on
allocated amounts involved in:
1. A prohibited allocation of qualified
securities by any ESOP or eligible
worker-owned cooperative.
2. An allocation described in
section 664(g)(5)(A). Section
664(g)(5)(A) prohibits any portion of the
assets of the ESOP attributable to
securities acquired by the plan in a
qualified gratuitous transfer to be
allocated to the account of:

-4-

Generally, the prohibited
allocation rules for securities in
CAUTION an S corporation are effective
for plan years beginning after
December 31, 2004; however, these
rules are effective for plan years ending
after March 14, 2001, if:
• The ESOP was established after
March 14, 2001, or
• The ESOP was established on or
before March 14, 2001, and the

!

deleted all text
in reference to section 4978A

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employer maintaining the plan was not
an S corporation.
The rules below apply to the
prohibited allocation, identified in items
3 and 4, under line 6. The excise tax on
these transactions under section 4979A
is 50% of the amount involved. The
amount involved includes:
1. The value of any synthetic equity
owned by a disqualified person in any
nonallocation year. Synthetic equity
means any stock option, warrant,
restricted stock, deferred issuance
stock right, or similar interest or right
that gives the holder the right to acquire
or receive stock of the S corporation in
the future. Synthetic equity may also
include a stock appreciation right,
phantom stock unit, or similar right to a
future cash payment based on the
value of the stock or appreciation; and
nonqualified deferred compensation as
described in Regulations section
1.409(p)-1(f)(2)(iv). The value of a
synthetic equity is the value of the
shares on which the synthetic equity is
based or the present value of the
nonqualified deferred compensation.
2. The value of any S corporation
shares in an ESOP accruing during a
nonallocation year or allocated directly
or indirectly under the ESOP or any
other plan of the employer qualified
under section 401(a) for the benefit of a
disqualified person. For additional
information see Regulations section
1.409(p)-1(b)(2).
3. The total value of all the
deemed-owned shares of all
disqualified persons.
A nonallocation year means a plan
year where the ESOP, at any time
during the year, holds employer
securities in an S corporation, and
disqualified persons own at least:
• 50% of the number of outstanding
shares of the S corporation (including
deemed-owned ESOP shares), or
• 50% of the aggregate number of
outstanding shares of stock (including
deemed-owned ESOP shares) and
synthetic equity in the S corporation.
For purposes of determining a
nonallocation year, the attribution rules
of section 318(a) will apply; however,
the option rule of section 318(a)(4) will
not apply. Additionally, the attribution
rules defining family member is
modified to include the individual’s:
• Spouse.
• Ancestor or lineal descendant of the
individual or the individual’s spouse.
• A brother or sister of the individual or
of the individual’s spouse and any lineal
descendant of the brother or sister.
A spouse of an individual who is
legally separated from an individual
under a decree of divorce or separate

maintenance is not treated as the
individual’s spouse.
An individual is a disqualified person
if:

• The total number of shares owned by
the person and the members of the
person’s family (as defined in section
409(p)(4)(D)) is at least 20% of the
deemed-owned shares (as defined in
section 409(p)(4)(C)) in the S
corporation, or
• The person owns at least 10% of the
deemed-owned shares (as defined in
section 409(p)(4)(C)) in the S
corporation.
Under section 409(p)(7), the
Secretary of the Treasury may,
CAUTION through regulations or other
guidance of general applicability,
provide that a nonallocation year occurs
in any case in which the principal
purpose of the ownership structure of
an S corporation constitutes an
avoidance or evasion of section 409(p).
For a description of situations where
the definition of nonallocation year was
considered, see Rev. Rul. 2004-4,
2004-6 I.R.B. 414.

!

For section 4979A excise taxes,
the amount entered on Part I,
line 6 is 50% of the amount
involved in the prohibited allocations
described in items 1 through 4, under
Line 6. Section 4979A – Tax on Certain
Prohibited Allocations of Qualified
ESOP Securities, earlier.
Line 10a. Section 4971(g)(2) - Failure
to Comply With a Funding
Improvement or Rehabilitation Plan.
Failure to comply with a funding
improvement or rehabilitation plan will
result in an excise tax equal to each
failure of each employer to make the
required contribution within the time
frame under such plan. The tax is paid
by each employer responsible for
contributing to or under the plan.
Include on line 10a the amount of each
contribution the employer failed to
make in a timely manner.
A funding improvement plan is a
plan which consists of the actions,
including options or a range of options
to be proposed to the bargaining
parties, formulated to provide, based on
reasonably anticipated experience and
reasonable actuarial assumptions, for
the attainment by the plan during the
funding improvement period.
A rehabilitation plan is a plan which
consists of actions, including options or
a range of options to be proposed to
the bargaining parties, formulated,
based on reasonably anticipated
experience and reasonable actuarial
assumptions, to enable the plan to
cease to be in critical status by the end
of the rehabilitation period.

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All, or part, of this excise tax may be
waived under Section 4971(g)(5).
Line 16. Section 4965 – Prohibited
Tax Shelter Transactions. For tax
years ending after May 17, 2006, if an
entity manager of a tax-exempt entity
approves or otherwise causes the entity
to be a party to a prohibited tax shelter
transaction during the year and knows
or has reason to know that the
transaction is a prohibited tax shelter
transaction, then the entity manager
must pay the excise tax under section
4965(b)(2).
For purposes of section 4965, plan
entities are:
• Qualified pension, profit-sharing, and
stock bonus plans described in section
401(a);
• Annuity plans described in section
403(a);
• Annuity contracts described in
section 403(b);
• Qualified tuition programs described
in section 529;
• Retirement plans described in
section 457(b) maintained by a
governmental employer;
• Individual retirement accounts within
the meaning of section 408(a);
• Individual retirement annuities within
the meaning of section 408(b);
• Archer medical savings accounts
(MSAs) within the meaning of section
220(d);
• Coverdell education savings
accounts described in section 530; and
• Health savings accounts within the
meaning of section 223(d).
An entity manager is the person who
approves or otherwise causes the entity
to be a party to a prohibited tax shelter
transaction.
The excise tax under section
4965(a)(2) is $20,000 for each approval
or other act causing the organization to
be a party to a prohibited tax shelter
transaction.
A prohibited tax shelter transaction
is:
1. A Listed transaction within the
meaning of section 6707A(c)(2). Listed
transactions are reportable transactions
that are the same as, or substantially
similar to, any transactions that have
been specifically identified by the
Secretary as a tax avoidance
transaction for purposes of section
6011.
2. A prohibited reportable
transaction is:
a. Any confidential transaction
within the meaning of Regulations
section 1.6011-4(b)(3); or
b. Any transaction with contractual
protection within the meaning of
Regulations section 1.6011-4(b)(4).

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Part II—Tax Due
Required disclosure. Lines 17
through 19.
If you are filing an amended
Form 5330 and you paid tax
with your original return and
those taxes have the same due date as
those previously reported, check the
box in item H and enter the tax reported
on your original return in the entry
space for line 18. If you file Form 5330
for a claim for refund or credit, show the
amount of overreported tax in
parentheses on line 19. Otherwise,
show the amount of additional tax due
on line 19 and include the payment with
the amended Form 5330.
Make your check or money order
payable to the “United States Treasury”
for the full amount due. Attach the
payment to your return. Write your
name, identifying number, plan number,
and “Form 5330, Section ____” on your
payment.

Schedule A (Section 4972)
Tax on Nondeductible
Employer Contributions to
Qualified Plans Employer
Section 4972. Section 4972 imposes
an excise tax on employers who make
nondeductible contributions to their
qualified plans. The excise tax is 10%
of the nondeductible contributions in
the plan as of the end of the employer’s
tax year.
A qualified plan for purposes of this
tax means any plan qualified under
section 401(a), any annuity plan
qualified under section 403(a), and any
simplified employee pension plan
qualified under section 408(k) or
408(p). The term qualified plan does
not include certain governmental plans
and certain plans maintained by
tax-exempt organizations.
Nondeductible contributions. For
purposes of section 4972,
nondeductible contributions for the
employer’s current tax year are the sum
of:
1. The excess (if any) of the
employer’s contribution for the tax year
less the amount allowable as a
deduction under section 404 for that
year, and
2. The total amount of the
employer’s contributions for each
preceding tax year that was not
allowable as a deduction under section
404 for such preceding year, reduced
by the sum of
a. The portion of such amount that
was available for return under the
applicable qualification rules and was
actually returned to the employer prior
to the close of the current tax year and

b. The portion of such amount that
became deductible for a preceding tax
year or for the current tax year.
Although pre-1987 nondeductible
contributions are not subject to this
excise tax, they are taken into account
to determine the extent to which
post-1986 contributions are deductible.
See section 4972 and Pub. 560,
Retirement Plans for Small Business,
for details.
Defined benefit plans exception.
Generally, contributions up to the
current unfunded liability of a defined
benefit plan are deductible, regardless
of the number of participants in the
plan. In addition, when determining the
amount of nondeductible contributions
for any tax year, an employer may
elect, for that tax year, not to include
any contributions to a defined benefit
plan except to the extent they exceed
the full-funding limitation (as defined in
section 412(c)(7), determined without
regard to section 412(c)(7)(A)(i)(I)).
This election applies to terminated and
ongoing plans. An employer making
this election cannot also benefit from
the exceptions for terminating plans
and for certain contributions to defined
contribution plans under section
4972(c)(6). When determining the
amount of nondeductible contributions,
the deductible limits under section
404(a)(7) must be applied first to
contributions to defined contribution
plans and then to contributions to
defined benefit plans.
Defined contribution plans
exception. Employer contributions to
one or more defined contribution plans
that are nondeductible because they
exceed the combined plan deduction
limits of section 404(a)(7) are not
subject to the 10% excise tax. In
determining the amount of
nondeductible contributions that are
subject to the 10% excise tax, do not
include:
• Employer contributions to one or
more defined contribution plans which
are nondeductible solely because of
section 404(a)(7) that do not exceed
the matching contributions described in
section 401(m)(4)(A),
• Contributions to a SIMPLE 401(k) or
a SIMPLE IRA that are considered
nondeductible because they are not
made in connection with the employer’s
trade or business. However, this
provision pertaining to SIMPLEs does
not apply to contributions made on
behalf of the employer or the
employer’s family, or
• Contributions not in excess of 6% of
the compensation (as defined in section
404(a) and adjusted in section
404(a)(12)) paid or accrued during the
tax year to the beneficiaries under the
plans.

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For purposes of this exception, the
combined plan deduction limits are first
applied to contributions to the defined
benefit plan and then to the defined
contribution plan.
Restorative payments to a defined
contribution plan are not considered
nondeductible contributions if the
payments are made to restore some or
all of the plan’s losses due to an action
(or a failure to act) that creates a
reasonable risk of liability for breach of
fiduciary duty. Amounts paid in excess
of the amount of the loss are not
considered restorative payments.
For these purposes, multiemployer
plans are not taken into consideration
in applying the overall limit on
deductions where there is a
combination of defined benefit and
defined contribution plans.

Schedule B (Section
4973(a)(3))
Tax on Excess Contributions to
Section 403(b)(7)(A) Custodial
Accounts
Section 4973(c) imposes a 6% excise
tax on the excess contributions to
403(b)(7)(A) custodial accounts at the
close of the tax year. The tax is paid by
the individual account holder.
Line 1. Enter the total current year
contributions, less any rollover
contributions described in sections
403(b)(8) or 408(d)(3)(A).
Line 2. The amount you will enter on
line 2 is the amount excludable under
section 415(c) (limit on annual
additions).
To determine the amount
excludable for a specific year,
CAUTION see Pub. 571, Tax-Sheltered
Annuity (403(b)) Plans, for that year.
The limit on annual additions under
section 415(c)(1)(A) is subject to
cost-of-living adjustments as described
in section 415(d). The dollar limit for a
calendar year as adjusted annually is
published during the fourth quarter of
the prior calendar year in the Internal
Revenue Bulletin.

!

Schedule C (Section 4975)
Tax on Prohibited Transactions
Section 4975 imposes an excise tax on
a disqualified person that engages in a
prohibited transaction with the plan.
Plan. For purposes of prohibited
transactions (section 4975), the term
plan means any of the following:
• A trust described in section 401(a)
that forms part of a plan.
• A plan described in section 403(a),
and that trust or plan is exempt from tax
under section 501(a).

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Instructions for Form 5330

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the Employee
Retirement
Income Security Act
(ERISA).

• An individual retirement account
described in section 408(a).
• An individual retirement annuity
described in section 408(b).
• An Archer MSA described in section
220(d).
• A Coverdell education savings
account described in section 530.
• A Health Savings Account described
in section 223(d).
• A trust described in section
501(c)(22).
If the IRS determined at any
time that your plan was a plan
CAUTION as defined above, it will always
remain subject to the excise tax on
prohibited transactions (section 4975).
This also applies to the tax on minimum
funding deficiencies (section 4971).

!

Disqualified person. A disqualified
person is any person who is:
1. A fiduciary.
2. A person providing services to
the plan.
3. An employer, any of whose
employees are covered by the plan.
4. An employee organization, any of
whose members are covered by the
plan.
5. Any direct or indirect owner of
50% or more of:
a. The combined voting power of all
classes of stock entitled to vote, or the
total value of shares of all classes of
stock of a corporation,
b. The capital interest or the profits
interest of a partnership,
c. The beneficial interest of a trust
or unincorporated enterprise in a, b, or
c, which is an employer or an employee
organization described in 3 or 4 above.
A limited liability company should be
treated as a corporation, or a
partnership, depending on how the
organization is treated for federal tax
purposes.
6. A member of the family of any
individual described in 1, 2, 3, or 5. A
member of a family is the spouse,
ancestor, lineal descendant, and any
spouse of a lineal descendant.
7. A corporation, partnership, or
trust or estate of which (or in which)
any direct or indirect owner holds 50%
or more of the interest described in 5a,
5b, or 5c of such entity. For purposes of
7, the beneficial interest of the trust or
estate is owned directly or indirectly, or
held by persons described in 1 through
5.
8. An officer, director (or an
individual having powers or
responsibilities similar to those of
officers or directors), a 10% or more
shareholder or highly compensated
employee (earning 10% or more of the
yearly wages of an employer) of a
person described in 3, 4, 5, or 7.

9. A 10% or more (in capital or
profits) partner or joint venturer of a
person described in 3, 4, 5, or 7.
10. Any disqualified person, as
described in 1 through 9 above, who is
a disqualified person with respect to
any plan to which a section 501(c)(22)
trust applies, that is permitted to make
payments under section 4223 of
ERISA.
Prohibited transaction. A
prohibited transaction is any direct or
indirect:
1. Sale or exchange, or leasing of
any property between a plan and a
disqualified person; or a transfer of real
or personal property by a disqualified
person to a plan where the property is
subject to a mortgage or similar lien
placed on the property by the
disqualified person within 10 years prior
to the transfer, or the property
transferred is subject to a mortgage or
similar lien which the plan assumes.
2. Lending of money or other
extension of credit between a plan and
a disqualified person.
3. Furnishing of goods, services, or
facilities between a plan and a
disqualified person.
4. Transfer to, or use by or for the
benefit of, a disqualified person of
income or assets of a plan.
5. Act by a disqualified person who
is a fiduciary whereby he or she deals
with the income or assets of a plan in
his or her own interest or account.
6. Receipt of any consideration for
his or her own personal account by any
disqualified person who is a fiduciary
from any party dealing with the plan
connected with a transaction involving
the income or assets of the plan.
Exemptions. See sections
4975(d), 4975(f)(6)(B)(ii), and
4975(f)(6)(B)(iii) for specific exemptions
to prohibited transactions. Also see
section 4975(c)(2) for certain other
transactions or classes of transactions
that may become exempt.
Line 1. Check the box that best
characterizes the prohibited transaction
for which an excise tax is being paid. A
prohibited transaction is discrete unless
it is of an ongoing nature. Transactions
involving the use of money (loans, etc.)
or other property (rent, etc.) are of an
ongoing nature and will be treated as a
new prohibited transaction on the first
day of each succeeding tax year or part
of a tax year that is within the taxable
period.
Line 2, Column (b). List the date of all
prohibited transactions that took place
in connection with a particular plan
during the current tax year. Also list the
date of all prohibited transactions that
took place in prior years unless either
the transaction was corrected in a prior

-7-

tax year or the section 4975(a) tax was
assessed in the prior tax year. A
disqualified person who engages in a
prohibited transaction must file a
separate Form 5330 to report the
excise tax due under section 4975 for
each tax year.
Line 2, Columns (d) and (e). The
amount involved in a prohibited
transaction means the greater of the
amount of money and the fair market
value (FMV) of the other property given,
or the amount of money and the FMV
of the other property received.
However, for services described in
sections 4975(d)(2) and (10), the
amount involved only applies to excess
compensation. For purposes of section
4975(a), FMV must be determined as of
the date on which the prohibited
transaction occurs. If the use of money
or other property is involved, the
amount involved is the greater of the
amount paid for the use or the FMV of
the use for the period for which the
money or other property is used. In
addition, transactions involving the use
of money or other property will be
treated as giving rise to a prohibited
transaction occurring on the date of the
actual transaction plus a new prohibited
transaction on the first day of each
succeeding tax year or portion of a
succeeding tax year which is within the
taxable period. The taxable period is
the period of time beginning with the
date of the prohibited transaction and
ending with the earliest of:
1. The date the correction is
completed,
2. The date of the mailing of a
notice of deficiency, or
3. The date on which the tax under
section 4975(a) is assessed.
See the instructions for Additional tax
for failure to correct the prohibited
transaction, under Schedule C for the
definition of correction.
Temporary Regulations section
141.4975-13 states that, until
CAUTION final regulations are written
under section 4975(f), the definitions of
amount involved and correction found
in Regulations section 53.4941(e)-1 will
apply.
Failure to transmit participant
contributions. For purposes of
calculating the excise tax on a
prohibited transaction 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.
Column (e). The initial tax on a
prohibited transaction is 15% of the
amount involved in each prohibited

!

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Instructions for Form 5330

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Figure 1. Example for the calendar 2005 plan year used when filing for the 2005 tax year
Schedule C — Tax on Prohibited Transactions (section 4975) Reported by the last day of the 7th month after the end of the
tax year of the employer (or other person who must file the return)
(a)
Transaction
number

(b) Date of
transaction (see
page 7 of the
instructions)

(i)

7-1-05

Part I,
(c) Description of prohibited transaction

(d) Amount involved in
prohibited transaction (see
page 7 of the instructions)

(e) Initial tax on prohibited
transaction (multiply each
transaction in column (d) by
the appropriate rate (see
page 7 of the instructions))

Loan

$6,000

$900

(ii)
(iii)
3. Add amounts in column (e). Enter here and on line 3a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

䊳

$900

Figure 2. Example for the calendar 2006 plan year used when filing for the 2006 tax year
Schedule C — Tax on Prohibited Transactions (Section 4975) Reported by the last day of the 7th month after the end of the
tax year of the employer (or other person who must file the return)
Part I,

(a)
Transaction
number

(b) Date of
transaction (see
page 7 of the
instructions)

(i)

7-1-05

Loan

$6,000

$900

(ii)

1-1-06

Loan

$12,000

$1,800

(c) Description of prohibited transaction

(d) Amount involved in
prohibited transaction (see
page 7 of the instructions)

(e) Initial tax on prohibited
transaction (multiply each
transaction in column (d) by
the appropriate rate (see
page 7 of the instructions))

(iii)
3. Add amounts in column (e). Enter here and on line 3a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 䊳

transaction for each year or part of a
year in the taxable period. Multiply the
amount in column (d) by 15%.
above Example. The following example of
a prohibited transaction does not cover
all types of prohibited transactions. For
more examples, see Regulations
section 53.4941(e)-1(b)(4).
A disqualified person borrows money
from a plan in a prohibited transaction
under section 4975. The FMV of the
use of the money and the actual
interest on the loan is $1,000 per month
(the actual interest is paid in this
example). The loan was made on July
1, 2005, (date of transaction) and
repaid on December 31, 2006 (date of
correction). The disqualified person’s
tax year is the calendar year. On July
31, 2007, the disqualified person files a
delinquent Form 5330 for the 2005 plan
year (which in this case is the calendar
year) and a timely Form 5330 for the
2006 plan year (which in this case is
the calendar year). No notice of
deficiency with respect to the tax
imposed by section 4975(a) has been
mailed to the disqualified person and
no assessment of such excise tax has
been made by the IRS before the time
the disqualified person filed the Forms
5330.
Each prohibited transaction has its
own separate taxable period which
begins on the date the prohibited
transaction occurred or is deemed to

occur and ends on the date of the
correction. The taxable period that
begins on the date the loan occurs runs
from July 1, 2005 (date of loan) through
December 31, 2006 (date of
correction). When a loan is a prohibited
transaction, the loan is treated as giving
rise to a prohibited transaction on the
date the transaction occurs, and an
additional prohibited transaction on the
first day of each succeeding tax year
(or portion of a tax year) within the
taxable period that begins on the date
the loan occurs. Therefore, in this
example, there are two prohibited
transactions, the first occurring on July
1, 2005 and ending on December 31,
2006, and the second occurring on
January 1, 2006 and ending on
December 31, 2006.
Section 4975(a) imposes a 15%
excise tax on the amount involved for
each tax year or part thereof in the
taxable period of each prohibited
transaction.
The Form 5330 for the year
ending December 31, 2005: The
amount involved to be reported on
Schedule C, line 2, column (d) is
$6,000 (6 months x $1,000). The
amount of the tax due is $900 ($6,000 x
15%). (See Figure 1.) (Any interest and
penalties imposed for the delinquent
filing of the Form 5330 and the
delinquent payment of the excise tax
Ital "Figure 1"

-8-

$2,700

for 2005 will be billed separately to the
disqualified person.)
The Form 5330 for the year ending
December 31, 2006: The excise tax to
be reported would include both the
prohibited transaction of July 1, 2005,
with an amount involved of $6,000,
resulting in a tax due of $900 ($6,000 x
15%) and the second prohibited
transaction of January 1, 2006, with an
amount involved of $12,000 (12 months
x $1,000), resulting in a tax due of Itlal "Figure 2"
$1,800 ($12,000 x 15%). (See Figure
2.) The taxable period for the second
prohibited transaction runs from
January 1, 2006, through December 31,
2006 (date of correction). Because
there are two prohibited transactions
with taxable periods running during
2006, the section 4975(a) tax is due for
the 2006 tax year for both prohibited
transactions.
When a loan from a qualified

TIP plan that is a prohibited
transaction spans successive
tax years, and thus constitutes multiple
prohibited transactions, and during
those years the first tier prohibited
transaction excise tax rate changes, the
first tier excise tax liability for each
prohibited transaction is the sum of the
products resulting from multiplying the
amount involved for each year in the
taxable period for that prohibited
transaction by the excise tax rate in
effect at the beginning of that taxable

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period. For more information see Rev.
Rul. 2002-43, 2002-2 I.R.B. 85. Unlike
the previous example, the example in
Rev. Rul. 2002-43 contains unpaid
interest.
Additional tax for failure to correct
the prohibited transaction (Section
4975(b)). To avoid liability for
additional taxes and penalties, and in
some cases further initial taxes, a
correction must be made within the
taxable period. The term correction is
defined as undoing the prohibited
transaction to the extent possible, but in
any case placing the plan in a financial
position not worse than that in which it
would be if the disqualified person were
acting under the highest fiduciary
standards.
If the prohibited transaction is not
corrected within the taxable period, an
additional tax equal to 100% of the
amount involved will be imposed under
section 4975(b). Any disqualified
person who participated in the
prohibited transaction (other than a
fiduciary acting only as such) must pay
this tax imposed by section 4975(b).
Report the additional tax on line 3b of
Section A, Form 5330.
Line 4. If the “No” box is checked on
line 4, there has not been a correction
of all of the prohibited transactions by
the end of the tax year for which this
Form 5330 is being filed. Attach a
statement indicating when the
correction has been or will be made.

Schedule C(continued)
Schedule of Other Participating
Disqualified Persons and
Description of Correction
If more than one disqualified person
participated in the same prohibited
transaction, list on this schedule the
name, address, and social security
number or employer identification
number of each disqualified person,
other than the disqualified person who
files this return.
Line 5. For all transactions complete
columns (a), (b), and (c). If the
transaction has been corrected,
complete columns (a) through (e). If
additional space is needed you may
attach a statement fully explaining the
correction and identifying persons
involved in the prohibited transaction.

Prohibited Transactions and
Investment Advice
For financial investment advice
provided after December 31, 2006, 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.

For this purpose an eligible
investment advice arrangement is an
arrangement which either:
• Provides that any fees (including any
commission or other compensation)
received by the fiduciary adviser for
investment advice or with respect to the
sale, holding, or acquisition of any
security or other property for the
investment of plan assets do not vary
depending on the basis of any
investment option selected, or
• Uses a computer model under an
investment advice program, described
in section 4975(f)(8)(C), in connection
with investment advice provided by a
fiduciary adviser to a participant or
beneficiary.
Additionally, the eligible investment
advice arrangement must meet the
provisions of section 4975(f)(8)(D), (E),
(F), (G), (H), and (I).
For purposes of the statutory
exemption on investment advice, a
fiduciary adviser is defined in section
4975(f)(8)(J).
Correcting certain prohibited
transactions. Generally, if a
disqualified person enters into a direct
or indirect prohibited transaction (listed
in items 1 through 4 below) in
connection with the acquisition, holding,
or disposition of certain securities or
commodities, and the transaction is
corrected within the correction period, it
will not be treated as a prohibited
transaction and no tax will be
assessed.
1. Sale or exchange, or leasing of
any property between a plan and a
disqualified person.
2. Lending of money or other
extension of credit between a plan and
a disqualified person.
3. Furnishing of goods, services, or
facilities between a plan and a
disqualified person.
4. Transfer to, or use by or for the
benefit of, a disqualified person of
income or assets of a plan.
However, if at the time the
transaction was entered into, the
disqualified person knew or had reason
to know that the transaction was
prohibited, the transaction would be
subject to the tax on prohibited
transactions.
For purposes of section 4975(d)(23)
the term correct means to:
• Undo the transaction to the extent
possible and in all cases to make good
to the plan or affected account any
losses resulting from the transaction,
and
• Restore to the plan or affected
account any profits made through the
use of assets of the plan.
The correction period is the 14-day
period beginning on the date on which

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the disqualified person discovers or
reasonably should have discovered that
the transaction constitutes a prohibited
transaction.

Schedule D (Section 4971(a)
and (b))
Tax on Failure To Meet
Minimum Funding Standards
Section 4971(a) imposes a 10% tax
(5% for multiemployer plans) on the
amount of the accumulated funding
deficiency determined as of the end of
the plan year.
If a plan fails to meet the funding
requirements of section 412, the
employer and all controlled group
members will be subject to the excise
taxes under section 4971(a) and (b).
Except in the case of a
multiemployer plan, all members of a
controlled group are jointly and
severally liable for this tax. A controlled
group in this case means a controlled
group of corporations (section 414(b)),
a group of trades or businesses under
common control (section 414(c)), an
affiliated service group (section
414(m)), and any other group treated
as a single employer under section
414(o).
If the IRS determined at any time
that your plan was a plan as defined in
Schedule C (section 4975), it will
always remain subject to the excise tax
on failure to meet minimum funding
standards.
Line 1. If your plan has an
accumulated funding deficiency as
defined in section 412(a) (section 418B
if this is a multiemployer plan in
reorganization), complete line 1.
Line 2. Multiply line 1 by the
applicable tax rate shown below and
enter the result on line 2.
• 10% for plans (other than
multiemployer plans), or
• 5% for all multiemployer plans.
Additional tax for failure to correct
the accumulated funding deficiency.
When an initial tax is imposed by
section 4971(a) on an accumulated
funding deficiency and the accumulated
funding deficiency is not corrected
within the taxable period, an additional
tax equal to 100% of the accumulated
funding deficiency to the extent not
corrected is imposed by section
4971(b).
The taxable period is the period
beginning with the end of the plan year
where there is an accumulated funding
deficiency and ending on the earlier of:
• The date the notice of deficiency for
the section 4971(a) excise tax is
mailed, or
• The date the section 4971(a) excise
tax is assessed.

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Report the tax for failure to correct
the accumulated funding deficiency on
Part I, Section B, line 8b.

Section 4971(g)(3) - Failure to
Meet Requirements for Plans in
Endangered or Critical Status

Section 214 of the Pension
Protection Act of 2006 provides that, for
certain tax years ending after August
17, 2006, 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 if its employers participated
in a Federal Fishery Capacity
Reduction Program and the Northeast
Fisheries Assistance Program.

An excise tax is incurred by the failure
to meet requirements for plans in
endangered or critical status. A plan
which is in seriously endangered status
that fails to meet the applicable
benchmarks by the end of the funding
improvement period or a plan which is
in critical status and either fails to meet
the requirements of section 432 by the
end of the rehabilitation period or has
received a certification under section
432(b)(3)(A)(ii) for 3 consecutive plan
years that the plan is not making the
scheduled progress in meeting its
requirements under the rehabilitation
plan, shall be treated as having an
accumulated funding deficiency for the
last plan year in such period (and each
succeeding plan year until such
benchmarks or requirements are met).
The accumulated funding deficiency is
an amount equal to the greater of the
amount of the contributions necessary
to meet the benchmarks or
requirements or the amount of the
accumulated funding deficiency without
regard to this rule. The existence of an
accumulated funding deficiency triggers
the initial 5% excise tax under section
4971(a). A plan is in endangered status
if:
• The plan’s actuary timely certifies
that the plan is not in critical status for
that plan year and at the beginning of
that plan year the plan’s funded
percentage for plan year is less than 80
percent, or
• The plan has an accumulated
funding deficiency for the plan year or
is projected to have such an
accumulated funding deficiency for any
of the 6 succeeding plan years, taking
into account any extension of
amortization periods under section
431(d).
A plan is in critical status if it is
determined by the multiemployer plan’s
actuary that one of the four formulas in
section 432(b)(2) is met for the
applicable plan year.

Schedule E (Section 4971(f))
Tax on Failure to Pay Liquidity
Shortfall
Section 4971(f)(1). If your plan has a
liquidity shortfall for which an excise tax
under section 4971(f)(1) is imposed for
any quarter of the plan year, complete
lines 1 through 4.
Line 1. Include on line 1 the amount of
the liquidity shortfall(s) for each quarter
of the plan year.
Line 2. Include on line 2 the amount of
any contributions made to the plan by
the due date of the required quarterly
installment(s) which partially corrected
the liquidity shortfall(s) reported on line
1.
Line 3. Include on line 3 the net
amount of the liquidity shortfall (subtract
line 2 from line 1).
Additional tax for failure to correct
liquidity shortfall. If the plan has a
liquidity shortfall as of the close of any
quarter and as of the close of the
following 4 quarters, an additional tax
will be imposed under section
4971(f)(2) equal to the amount on
which tax was imposed by section
4971(f)(1) for such quarter. Report the
additional tax on Part I, Section B, line
9b.

Schedule F (Section 4971(g))
For years beginning after 2007, Section
4971(g), which pertains to
multiemployer plans, imposes an excise
tax for failure to comply with a funding
improvement or rehabilitation plan,
failure to meet requirements for plans in
endangered or critical status, or failure
to adopt a rehabilitation plan. See page
5 of the instructions for information on
Section 4971(g)(2), Failure to Comply
With A Funding Improvement or
Rehabilitation Plan.
At the time of the drafting of
these instructions, technical
CAUTION correction bills were pending in
the Congress that may alter this.

!

begins on the first day of the 240-day
period that a multiemployer plan has to
adopt a rehabilitation plan once it has
entered critical status and that ends on
the day that the rehabilitation plan is
adopted. Liability for this tax is imposed
on each plan sponsor.
This excise tax may not be waived.

Schedule G (Section 4977)
Tax on Excess Fringe Benefits
If you made an election to be taxed
under section 4977 to continue your
nontaxable fringe benefit policy that
was in existence on or after January 1,
1984, check the “Yes” box on line 1 and
complete lines 2 through 4.
Line 3. The excess fringe benefits are
figured by subtracting 1% of the
aggregate compensation paid by you to
your employees during the calendar
year that was includable in their gross
income from the aggregate value of the
nontaxable fringe benefits under
sections 132(a)(1) and 132(a)(2).

Schedule H (Section 4979)
Tax on Excess Contributions to
Certain Plans

Section 4971(g)(4) - Failure to
Adopt Rehabilitation Plan

Section 4979. Any employer who
maintains a plan described in section
401(a), 403(a), 403(b), 408(k), or
501(c)(18) may be subject to an excise
tax on the excess aggregate
contributions made on behalf of highly
compensated employees. The
employer may also be subject to an
excise tax on the excess contributions
to a cash or deferred arrangement
connected with the plan.
The tax is on the excess
contributions and the excess aggregate
contributions made to or on behalf of
the highly compensated employees (as
defined in section 414(q)).
A highly compensated employee
generally is an employee who:
1. Was a 5-percent owner at any
time during the year or the preceding
year, or
2. For the preceding year had
compensation from the employer in
excess of a dollar amount for the year
($100,000 for 2006 and for 2007) and,
if the employer so elects, was in the
top-paid group for the preceding year.

An excise tax is incurred by the failure
to adopt a rehabilitation plan within the
time prescribed under section 432. The
amount of the tax, which is imposed on
the plan sponsor, is equal to the greater
of the amount of the tax imposed under
section 4971(a) (determined without
regard to section 4971(g)), or the
amount equal to $1,100 multiplied by
the number of days in the tax year
which are included in the period that

An employee is in the top-paid group
for any year if the employee is in the
group consisting of the top 20% of the
employees of the employer when
ranked on the basis of compensation
paid. An employee (who is not a 5%
owner) who has compensation in
excess of $100,000 is not a highly
compensated employee if the employer
elects the top-paid group limitation and

All, or part, of this excise tax may be
waived under section 4971(g)(5).

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the employee is not a member of the
top-paid group.
The excess contributions subject to
the section 4979 excise tax are equal to
the amount by which employer
contributions actually paid over to the
trust exceed the employer contributions
that could have been made without
violating the special nondiscrimination
requirements of section 401(k)(3) or
section 408(k)(6) in the instance of
certain SEPs.
The excess aggregate contributions
subject to the section 4979 excise tax
are equal to the amount by which the
aggregate matching contributions of the
employer and the employee
contributions (and any qualified
nonelective contribution or elective
contribution taken into account in
computing the contribution percentage
under section 401(m)) actually made on
behalf of the highly compensated
employees for each plan year exceed
the maximum amount of the
contributions permitted in the
contribution percentage computation
under section 401(m)(2)(A).
However, there is no excise tax
liability if the excess contributions or the
excess aggregate contributions and any
income earned on the contributions are
distributed (or, if forfeitable, forfeited) to
the participants for whom the excess
contributions were made within 21/2
months after the end of the plan year.

Schedule I (Section 4980)
Tax on Reversion of Qualified
Plan Assets to an Employer
Section 4980 imposes an excise tax on
an employer reversion of qualified plan
assets to an employer. Generally, the
reversion excise tax is 20% of the
amount of the employer reversion. The
excise tax rate is increased to 50% if
the employer does not (1) establish or
maintain a qualified replacement plan
following the plan termination or (2)
provide certain pro-rata benefit
increases in connection with the plan
termination. See section 4980(d)(1)(A)
or (B) for more information.
An employer reversion is the amount
of cash and the FMV of property
received, directly or indirectly, by an
employer from a qualified plan. For
exceptions to this definition, see section
4980(c)(2)(B) and section 4980(c)(3).
A qualified plan is:

• Any plan meeting the requirements of

section 401(a) or 403(a), other than a
plan maintained by an employer if that
employer has at all times been exempt
from federal income tax, or
• A governmental plan within the
meaning of section 414(d).

Terminated defined benefit plan.
If a defined benefit plan is terminated,
and an amount in excess of 25% of the
maximum amount otherwise available
for reversion is transferred from the
terminating defined benefit plan to a
defined contribution plan, the amount
transferred is not treated as an
employer reversion for purposes of
section 4980. However, the amount the
employer receives is subject to the 20%
excise tax. For additional information,
see Rev. Rul. 2003-85, 2003-32 I.R.B.
291.
Lines 1 through 4. If you owe the
section 4980 tax, enter the date of the
reversion on line 1. Enter the reversion
amount on line 2a, and the applicable
excise tax rate on line 2b. If you use a
tax percentage other than 50% on line
2b, explain on line 4 why you qualify to
use a rate other than 50%.
Include on line 3 and Part I, Section
D, line 14 the section 4980 tax on
employer reversions from a qualified
plan.

Schedule J (Section 4980F)
Tax on Failure to Provide
Notice of Significant Reduction
in Future Accruals
Section 4980F imposes on an employer
(or, in the case of a multiemployer plan,
the plan) an excise tax of $100 per day
per each applicable individual and each
employee organization representing
participants who are applicable
individuals for each day of the
noncompliance period for the failure to
give notice of plan amendments that
provide for a significant reduction in the
rate of future benefit accrual or the
elimination or significant reduction of an
early retirement benefit or retirementtype subsidy. This notice is called a
section 204(h) notice because section
204(h) of ERISA has parallel notice
requirements.
An applicable individual is a
participant in the plan, or an alternate
payee of a participant under a qualified
domestic relations order, whose rate of
future benefit accrual (or early
retirement benefit or retirement-type
subsidy) under the plan may
reasonably be expected to be
significantly reduced by a plan
amendment (starting in plan years
beginning after December 31, 2007, the
requirement to give notice is extended
to an employer who has an obligation
to contribute to a multiemployer plan).
Whether a participant, alternate
payee or an employer, as described in
the above paragraph, is an applicable
individual is determined on a typical
business day that is reasonably
approximate to the time the section
204(h) notice is provided (or at the

-11-

latest date for providing section 204(h)
notice, if earlier), based on all relevant
facts and circumstances. For more
information in determining whether an
individual is a participant or alternate
payee, see Regulations section
54.4980F-1, Q&A 10.
The noncompliance period is the
period beginning on the date the failure
first occurs and ending on the date the
notice of the failure is provided or the
failure is corrected.
Exceptions. Section 4980F excise
tax will not be imposed for a failure
during any period in which:
1. Any person subject to liability for
the tax did not know that the failure
existed and exercised reasonable
diligence to meet the notice
requirement. A person is considered to
have exercised reasonable diligence,
but did not know the failure existed,
only if:
a. The responsible person exercised
reasonable diligence in attempting to
deliver section 204(h) notice to
applicable individuals by the latest date
permitted. Generally, the section 204(h)
notice must be provided at least 45
days before the effective date of the
section 204(h) amendment. For
exceptions to this rule, see Regulations
section 54.4980F-1, Q&A 9.
b. At the latest date permitted for
delivery of section 204(h) notice, the
person reasonably believes that section
204(h) notice was actually delivered to
each applicable individual by that date.
2. Any person subject to liability for
the tax exercised reasonable diligence
to meet the notice requirement and
corrects the failure within 30 days after
the employer (or other person
responsible for the tax) knew, or
exercising reasonable diligence would
have known, that the failure existed.
If the person subject to liability for
the excise tax exercised reasonable
diligence to meet the notice
requirement, the total excise tax
imposed during a tax year of the
employer will not exceed $500,000.
Furthermore, in the case of a failure
due to reasonable cause and not to
willful neglect, the Secretary of the
Treasury is authorized to waive the
excise tax to the extent that the
payment of the tax would be excessive
relative to the failure involved. See Rev.
Proc. 2007-4, 2007-1 I.R.B. 118 for
procedures to follow in applying for a
waiver of part or all of the excise tax
due to reasonable cause. You can find
Rev. Proc. 2007-4 at www.irs.gov/pub/
irs-irbs/irb07-01.pdf.
Line 4. A failure occurs on any day
that any applicable individual is not
provided section 204(h) notice. For
more information in determining

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whether an individual is a participant or
alternate payee, see Regulations
section 54.4980F-1, Q&A 10.
Example. There are 1,000
applicable individuals (AI). The plan
administrator fails to give section 204(h)
notice to 100 AIs for 60 days, and to 50
of those AIs for an additional 30 days.
In this case there are 7,500 failures
((100 AI x 60 days) + (50 AI x 30 days)
= 7,500).
Privacy Act and Paperwork
Reduction Act Notice. We ask for
the information on this form to carry out
the Internal Revenue laws of the United
States. This form is required to be filed
under sections 4965, 4971, 4972, 4973,
4975, 4976, 4977, 4978, 4979, 4979A,
4980, and 4980F of the Internal
Revenue Code. Section 6109 requires
you to provide your taxpayer
identification number (SSN or EIN). If
you fail to provide this information in a
timely manner, you may be liable for

penalties and interest. Routine uses of
this information include giving it to the
Department of Justice for civil and
criminal litigation, and cities, states, and
the District of Columbia for use in
administering their tax laws. We may
also disclose this information to federal
and state or local agencies to enforce
federal nontax criminal laws and to
combat terrorism.
You are not required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMB
control number. Books or records
relating to a form or its instructions
must be retained as long as their
contents may become material in the
administration of any Internal Revenue
law. Generally, tax returns and return
information are confidential, as required
by section 6103.
The time needed to complete and
file this form will vary depending on

individual circumstances. The
estimated average time is: 30

25 hr., 06 min.

Learning about the
law or the form . . .

14 hr., 45 min.

Preparing and
sending the form
to the IRS . . . . . . .

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15 hr., 45 min
18 hr., 8 min
17 hr., 01 min.

If you have comments concerning
the accuracy of these time estimates or
suggestions for making this form
simpler, we would be happy to hear
from you. You can write to the Internal
Revenue Service, Tax Products
Coordinating Committee,
SE:W:CAR:MP:T:T:SP, IR-6526, 1111
Constitution Ave. NW, Washington, DC
20224. Do not send this form to this
address. Instead, see Where To File on
page 2.

3
delete 4978A, repealed

hr., 22 min

Recordkeeping . . .

Page 13 of 13

Instructions for Form 5330

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Index

A
Amended return . . . . . . . . . . . . 3, 6
Amount involved . . . . . . . . . . . . . 5
C
Claim for refund . . . . . . . . . . . . . . 3
D
Disqualified benefit, funded
welfare plans . . . . . . . . . . . . . . 4
Disqualified person . . . . . . . . . . . 9
Due dates . . . . . . . . . . . . . . . . . . . 3
E
Eligible investment advice
arrangement . . . . . . . . . . . . . . . 9
Employer reversion . . . . . . . . . 11
Entity manager . . . . . . . . . . . . . . . 5
ESOP . . . . . . . . . . . . . . . . . . . . . . . 4
Prohibited allocations . . . . . . 4
ESOP dispositions . . . . . . . . . . . 4
Excess contributions:
403(b)(7) plans . . . . . . . . . . . . 6
Section 4979 . . . . . . . . . . . . . 10
Excise tax due dates . . . . . . . 3, 4
Extension . . . . . . . . . . . . . . . . . . . . 3
F
Form 5558 . . . . . . . . . . . . . . . . . . . 3
Form 8886-T . . . . . . . . . . . . . . . . . 6
Funded welfare plans . . . . . . . . 4
I
Interest . . . . . . . . . . . . . . . . . . . . . . 3
Investment advice . . . . . . . . . . . . 9

L
Late filing . . . . . . . . . . . . . . . . . . . . 3
Interest . . . . . . . . . . . . . . . . . . . . 3
Penalty . . . . . . . . . . . . . . . . . . . . 3
Late payment . . . . . . . . . . . . . . . . 3
Liquidity shortfall . . . . . . . . . . . . 10
Additional tax . . . . . . . . . . . . . 10
Listed transaction . . . . . . . . . . . . 5
M
Minimum funding standards,
failure . . . . . . . . . . . . . . . . . . . . . 9
N
Nonallocation period . . . . . . . . . 4
Nonallocation year . . . . . . . . . . . 5
Nondeductible employer
contributions . . . . . . . . . . . . . . . 6
Exception, defined benefit
plan . . . . . . . . . . . . . . . . . . . . . 6
Exception, defined
contribution plan . . . . . . . . . 6
Nondeductible
contributions . . . . . . . . . . . . 6
Qualified plan . . . . . . . . . . . . . . 6
Notice of significant reduction in
future accruals . . . . . . . . . . . . 11
Applicable individual . . . . . . 11
P
Payment of taxes . . . . . . . . . . . .
Penalty . . . . . . . . . . . . . . . . . . . . . .
Late payment . . . . . . . . . . . . . .
Private delivery services . . . . . .
Prohibited allocation:
Disqualified person . . . . . . . .
ESOP . . . . . . . . . . . . . . . . . . . . .

6
3
3
3
5
4

Nonallocation period . . . . . . .
S corporation . . . . . . . . . . . . . .
Synthetic equity . . . . . . . . . . . .
Worker-owned
cooperative . . . . . . . . . . . . . .
Prohibited reportable
transaction . . . . . . . . . . . . . . . .
Prohibited tax shelter
transaction . . . . . . . . . . . . . . . .
Entity manager . . . . . . . . . . . .
Required disclosure . . . . . . . .
Prohibited transaction . . . . . . . .
Correcting . . . . . . . . . . . . . . . . .
Correction period . . . . . . . . . .
Definition . . . . . . . . . . . . . . . . . .
Disqualified person . . . . . . . .
Exemptions . . . . . . . . . . . . . . . .
Failure to correct . . . . . . . . . . .
Investment advice . . . . . . . . .
Purpose of form . . . . . . . . . . . . . .

4
4
5
4
5
5
5
6
6
9
9
7
7
7
9
9
1

Q
Qualified ESOP securities . . . . 4
R
Required disclosure:
Prohibited tax shelter
transaction . . . . . . . . . . . . . . 6
Reversion of qualified plan
assets . . . . . . . . . . . . . . . . . . . . 11
Qualified plan . . . . . . . . . . . . . 11
Terminated defined benefit
plan . . . . . . . . . . . . . . . . . . . . 11
S
S corporations:
Prohibited allocations . . . . . . 4
Section 403(b) plan . . . . . . . . . . 6

-13-

Section 4965 . . . . . . . . . . . . . . . . . 5
Section 4971(a) . . . . . . . . . . . . . . 9
Section 4971(b) . . . . . . . . . . . . . . 9
Section 4971(f) . . . . . . . . . . . . . 10
Section 4971(g) . . . . . . . . . . . . . 10
Section 4971(g)(2) . . . . . . . . . . . 5
Section 4971(g)(3) . . . . . . . . . . 10
Section 4971(g)(4) . . . . . . . . . . 10
Section 4972 . . . . . . . . . . . . . . . . . 6
Section 4973(a)(3) . . . . . . . . . . . 6
Section 4975 . . . . . . . . . . . . . . . . . 6
Section 4976 . . . . . . . . . . . . . . . . . 4
Section 4977 . . . . . . . . . . . . . . . . 10
Section 4978 . . . . . . . . . . . . . . . . . 4
Section 4979 . . . . . . . . . . . . . . . . 10
Section 4979A . . . . . . . . . . . . . . . 4
Section 4980 . . . . . . . . . . . . . . . . 11
Section 4980F . . . . . . . . . . . . . . 11
Summary of taxes due . . . . . . . 4
Synthetic equity . . . . . . . . . . . . . . 5
Amount involved . . . . . . . . . . . 5
T
Table of due dates . . . . . . . . . . . 3
W
When to file . . . . . . . . . . . . . . . . . .
Where to file . . . . . . . . . . . . . . . . .
Who must file . . . . . . . . . . . . . . . .
Worker-owned
cooperative . . . . . . . . . . . . . . . .

3
3
1
4

■