Return of Excise Taxes Related to Employee Benefit Plans

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Instructions for Form 5330

Department of the Treasury
Internal Revenue Service

(Rev. December 2013)

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

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.

advice arrangement under Department
of Labor guidelines.

DRAFT AS OF
September 16, 2013
Future developments. For the latest
information about developments related
to Form 5330 and its instructions, such
as legislation enacted after they were
published, go to www.irs.gov/form5330.

General Instructions
Reminders

Section 4965—Prohibited Tax Shel­
ter 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 Sta­
tus. 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 Con­
tributions to Qualified Employer
Plans. The deduction limits of section
404(a)(1)(D) were altered for certain tax
years beginning after December 31,
Sep 10, 2013

Section 4975—Prohibited Transac­
tions. 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
Cat. No. 11871X

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 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
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 time
required under section 432.
7. An employer liable for the tax
under section 4972 for nondeductible
contributions to qualified plans.
8. An individual 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. A disqualified person 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. An employer liable for the tax
under section 4976 for maintaining a
funded welfare benefit plan that
provides a disqualified benefit during
any tax year.
11. An employer who pays excess
fringe benefits and has elected to be
taxed under section 4977 on such
payments.
12. An employer or worker-owned
cooperative, as defined in section
1042(c)(2), that maintains an employee
stock ownership plan (ESOP) that
disposes of the qualified securities, as
defined in section 1042(c)(1), within the
specified 3-year period (see section
4978).

13. An employer liable for the tax
under section 4979 on excess
contributions to plans with a cash or
deferred arrangement, etc.
14. An 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
an 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. An employer who receives an
employer reversion from a deferred
compensation plan taxable under
section 4980.
16. An 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.

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.

DRAFT AS OF
September 16, 2013
A Form 5330 and tax payment is
required for any of the following.
Each year you fail to meet the
minimum funding standards under
section 412 or you contribute an excess
amount to your section 403(b)(7)(A)
custodial account.
Each year any of the following under
Who Must File, earlier, apply: (1), (3),
(5), (6), (7), (9), (10), (11), (12), (13),
(14), or (16).
Each failure of an employer to make
the required contribution to a
multiemployer plan, as required by a
funding improvement or rehabilitation
plan under section 432.
A reversion of plan assets from a
qualified plan taxable under section
4980.
Each year or part of a year in the
taxable period in which a prohibited
transaction occurs 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 all excise
taxes with the same filing due date.
However, if the taxes are from separate
plans, file separate forms for each plan.
Generally, filing 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, Annual Return/Report of
Employee Benefit Plan.
­2­

!

CAUTION

Form 5558 does not extend the
time to pay your taxes. See the
instructions for Form 5558.

Where To File

File Form 5330 at the following
address:

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.
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.
Private delivery services
cannot deliver items to P.O.
CAUTION
boxes. You must use the U.S.
Postal Service to mail any item to an
IRS P.O. box address.

!

Interest and Penalties
Interest. Interest is charged on taxes
not paid by the due date even if an
extension of time to file is granted.
Interest is also charged on penalties
imposed from the due date, including
extensions, to the date of payment for
failure to file, negligence, fraud, gross
valuation overstatements, and
substantial understatements of tax. The
interest rate is 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.

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

THEN file Form 5330 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.

DRAFT AS OF
September 16, 2013
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.
To receive a credit for overpaid taxes.
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 of the Entity Section and report
the correct amount of taxes on
Schedule A through K, as appropriate,
and on Part I, lines 1 through 16. See
the 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 provide
the appropriate supporting evidence.
See Regulations section 301.6402-2 for
more details.

Specific Instructions
Filer tax year. Enter the tax year of the
employer, entity, or individual on whom
the tax is imposed by using the plan
year beginning and ending dates
entered in Part I of Form 5500 or by
using the tax year of the business return
filed.
Item A. Name and address of filer.
Enter the name and address of the

4971

last day of the 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)

last day of the 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)

last day of the 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)

last day of the 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)

last day of the 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

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

4973(a)(3)

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

4975

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

4976

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

4977

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

4978

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

4979

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

4979A

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

4980

last day of the month following the month in which the reversion
occurred.

4980F

last day of the 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.

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.
If the plan has a foreign address,
enter the information in the following
order: city or town, state or province,
country, and ZIP or foreign postal code.
­3­

Follow the country's practice for
entering the postal code. Do not
abbreviate the country name.
Item B. Filer's identifying number.
Enter the filer's identifying number in the
appropriate section. The filer's
identifying number is either the filer's
employer identification number (EIN) or
the filer's social security number (SSN),
but not both. The identifying number of
an individual, other than a sole
proprietor with an EIN, is his or her

social security number. The identifying
number for all others is their EIN. The
EIN is the nine-digit number assigned to
the plan sponsor/employer, entity, or
individual on whom the tax is imposed.

properly identifying the plan and time
period for which the Form 5330 is being
filed. For example, a plan year ending
March 31, 2007, should be shown as
03/31/2007.

Item C. Name of plan. Enter the
formal name of the plan, name of the
plan sponsor, or name of the insurance
company or financial institution of the
direct filing entity (DFE). In the case of a
group insurance arrangement (GIA),
enter the name of the trust or other
entity that holds the insurance contract.
In the case of a master trust investment
account (MTIA), enter the name of the
sponsoring employers.
If the plan covers only the employees
of one employer, enter the employer's
name or enough information to identify
the plan. This should be the same name
indicated on the Form 5500 series
return/report if that form is required to be
filed for the plan.

Item G. Plan number. Enter the
three-digit number that the employer or
plan administrator assigned to the plan.
This three-digit number is used with the
EIN entered on line B and is used by the
IRS, the Department of Labor, and the
Pension Benefit Guaranty Corporation
as a unique 12-digit number to identify
the plan.

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.
Any portion of the fund that reverts to
the benefit of the employer.

DRAFT AS OF
September 16, 2013
Item D. Name and address of plan
sponsor. The term “plan sponsor”
means:
1. The employer, for an employee
benefit plan established or maintained
by a single employer;
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.
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.
If the plan has a foreign address,
enter the information in the following
order: city or town, state or province,
and country. Follow the country's
practice for entering the postal code. Do
not abbreviate the country name.
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

!

CAUTION

If the plan number is not
provided, this will cause a
delay in processing your return.

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, earlier.
Filer's signature. To reduce the
possibility of correspondence and
penalties, 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 the return must sign the return
in the space provided and fill in the Paid
Preparer's Use Only area. See section
7701(a)(36)(B) for exceptions.
In addition to signing and completing
the required information, the paid
preparer must give a copy of the
completed return to the taxpayer.
Note. A paid preparer may sign original
or amended returns by rubber stamp,
mechanical device, or computer
software program.

Part I. Taxes
Line 4. Enter the total amount of the
disqualified benefit under section 4976.
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
­4­

Lines 5a and 5b. Section 4978
imposes an excise tax on the sale or
transfer of securities acquired in a sale
or qualified gratuitous transfer to which
section 1042 or section 664(g) applied,
respectively, if the sale or transfer takes
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).
See section 4978(b)(2) for the
limitation on the amount of tax.
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)).
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.

employer securities acquired in a
section 1042 sale to accrue or be
allocated, directly or indirectly, to the
taxpayer, or any person related to the
taxpayer, involved in the transaction
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 ending
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.

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
deemed-owned shares of all
disqualified persons.

DRAFT AS OF
September 16, 2013
For section 4978 excise taxes,
the amount entered in 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 imposes a 50%
excise tax on allocated amounts
involved in any of the following.
1. A prohibited allocation of qualified
securities by any ESOP or eligible
worker-owned cooperative.
2. A prohibited 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:
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. A synthetic equity owned by a
disqualified person in any nonallocation
year.
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 nonrecognition-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

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
employer maintaining the plan was not
an S corporation.

!

Prohibited allocations of
securities in an S corporation. For
purposes of items (3) and (4), under
Line 6, earlier, the excise tax on these
transactions under section 4979A is
50% of the amount involved. The
amount involved includes the following.
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
­5­

For this purpose, 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 are
modified to include the individual's:
Spouse,
Ancestor or lineal descendant of the
individual or the individual's spouse,
and
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 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). See
Regulations section 1.408(p)-1.
For section 4979A excise taxes, the
amount entered in Part I, line 6 is 50% of
the amount involved in the prohibited
allocations described in items (1)
through (4), earlier, under Line 6.

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 maintained by a
governmental employer described in
section 457(b);
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 any listed transaction and any
prohibited reportable transaction, as
defined below.
1. A “Listed transaction” is a
reportable transaction that is the same
as, or substantially similar to, a
transaction 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).

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.

DRAFT AS OF
September 16, 2013
Line 10a. Under section 4971(g)(2),
each employer who contributes to a
multiemployer plan and fails to comply
with a funding improvement or
rehabilitation plan will be liable for an
excise tax for each failure to make a
required contribution within the time
frame under such plan. Enter 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 of the following
requirements by the plan during the
funding improvement period.
1. The plan's funded percentage as
of the close of the funding improvement
period equals or exceeds a percentage
equal to the sum of:
a. The percentage as of the
beginning of the funding improvement
period, plus
b. 33% of the difference between
100% and the percentage as of the
beginning of the funding improvement
period (or 20% of the difference if the
plan is in seriously endangered status).
2. No accumulated funding
deficiency for any plan year during the
funding improvement period, taking into
account any extension of amortization
period under section 431(d).

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 to enable
the plan to cease to be in critical status
by the end of the rehabilitation period.
All or part of this excise tax may be
waived under section 4971(g)(5).
Line 16. If a tax-exempt entity manager
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, the entity manager must
pay an excise tax under section
4965(b)(2).

Part II. Tax Due
If you are filing an amended
Form 5330 and you paid taxes
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
­6­

File at the address shown under Where
To File, earlier.

Schedule A. Tax on
Nondeductible Employer
Contributions to Qualified
Employer Plans (Section
4972)

Section 4972. Section 4972 imposes
an excise tax on employers who make
nondeductible contributions to their
qualified plans. The excise tax is equal
to 10% of the nondeductible
contributions in the plan as of the end of
the employer's tax year.
A “qualified employer plan” for
purposes of this section 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 any simple retirement account
under section 408(p). The term qualified
plan does not include certain
governmental plans and certain plans
maintained by tax-exempt
organizations.
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 that amount
available for return under the applicable
qualification rules and 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.

Contributions not in excess of 6% of
compensation, as defined in section
404(a) and adjusted in section
404(a)(12), paid or accrued during the
tax year to beneficiaries under the
plans.
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 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 C. Tax on
Prohibited Transactions
(Section 4975)
Section 4975. Section 4975 imposes
an excise tax on a disqualified person
that engages in a prohibited transaction
with the plan.

DRAFT AS OF
September 16, 2013
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, in the case of a multiemployer
plan, to the extent they exceed the
full-funding limitation (as defined in
section 431(c)(6)). 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 subject to
the 10% excise tax, do not include any
of the following.
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 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.

Schedule B. Tax on
Excess Contributions to
Section 403(b)(7)(A)
Custodial Accounts
(Section 4973(a)(3))

Section 4973(a) imposes a 6% excise
tax on excess contributions to section
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 total current year
contributions, less any rollover
contributions described in sections
403(b)(8) or 408(d)(3)(A).
Line 2. Enter the amount excludable
under section 415(c) (limit on annual
additions).
To determine the amount
excludable for a specific year,
see Pub. 571, Tax-Sheltered
Annuity Plans (403(b) Plans), for that
year.

TIP

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.

­7­

Plan. For purposes of this section,
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)
that is exempt from tax under section
501(a).
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 under section
4975. This also applies to the tax on
minimum funding deficiencies under
section 4971.

!

Disqualified person. A “disqualified
person” is a person who is any of the
following.
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. A 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 this
purpose, 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 the
Employee Retirement Income Security
Act (ERISA).

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.

succeeding tax year or portion of a
succeeding tax year which is within the
taxable period. The “taxable period” for
this purpose 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.

DRAFT AS OF
September 16, 2013

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; or

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
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
­8­

See the instructions for Schedule C,
under Additional tax for failure to correct
the prohibited transaction (section
4975(b)), 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
transaction for each year or part of a
year in the taxable period. Multiply the
amount in column (d) by 15%.
Example. The example of a
prohibited transaction below 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, 2006 (date of
transaction) and repaid on December
31, 2007 (date of correction). The
disqualified person's tax year is the
calendar year. On July 31, 2008, the
disqualified person files a delinquent
Form 5330 for the 2006 plan year
(which in this case is the calendar year)
and a timely Form 5330 for the 2007

Figure 1. Example for the calendar 2006 plan year used when filing for the 2006 tax year
Schedule C. Tax on Prohibited Transactions (Section 4975) (see instructions) 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
instructions)

(d) Amount involved in prohibited
transaction (see instructions)

(c) Description of prohibited transaction

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

DRAFT AS OF
September 16, 2013
(i)

7-1-06

Loan

$6,000

$900

(ii)

(iii)

3 Add amounts in column (e). Enter here and on Part I, line 3a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

▶

$900

Figure 2. Example for the calendar 2007 plan year used when filing for the 2007 tax year

Schedule C. Tax on Prohibited Transactions (Section 4975) (see instructions) 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
instructions)

(d) Amount involved in prohibited
transaction (see instructions)

(i)

7-1-06

Loan

$6,000

$900

(ii)

1-1-07

Loan

$12,000

$1,800

(c) Description of prohibited transaction

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

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 that 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, 2006
(date of loan) through December 31,
2007 (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, 2006 and ending on
December 31, 2006, and the second
occurring on January 1, 2007 and
ending on December 31, 2007.
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, 2006: The
amount involved to be reported on the
Form 5330, Schedule C, line 2, column
(d), for the 2006 plan year, is $6,000 (6
months x $1,000). The tax due is $900
($6,000 x 15%). (See Figure 1.) (Any
interest and penalties imposed for the
delinquent filing of Form 5330 and the
delinquent payment of the excise tax for
2006 will be billed separately to the
disqualified person.)
The Form 5330 for the year
ending December 31, 2007: The
excise tax to be reported on the 2007
Form 5330 would include both the
prohibited transaction of July 1, 2006,
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, 2007, with an
amount involved of $12,000 (12 months
x $1,000), resulting in a tax due of
$1,800 ($12,000 x 15%). (See Figure 2.)
The taxable period for the second
prohibited transaction runs from
January 1, 2007, through December 31,
2007 (date of correction). Because
there are two prohibited transactions
with taxable periods running during
2007, the section 4975(a) tax is due for
­9­

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

▶

$2,700

the 2007 tax year for both prohibited
transactions.
When a loan from a qualified
plan that is a prohibited
transaction spans successive
tax years, constituting 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
period. For more information, see Rev.
Rul. 2002-43, 2002-32 I.R.B. 85 at
www.irs.gov/pub/irs-irbs/irb02-28.pdf.
Unlike the previous example, the
example in Rev. Rul. 2002-43 contains
unpaid interest.

TIP

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 in Part I, Section A,
line 3b.

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 (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.

If a plan fails to meet the funding
requirements under section 412, the
employer and all controlled group
members will be subject to 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 under section 414(b), a
group of trades or businesses under
common control under section 414(c),
an affiliated service group under section
414(m), and any other group treated as
a single employer under section 414(o).

DRAFT AS OF
September 16, 2013
Line 4. Check “No” if 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.

Line 5. If more than one disqualified
person participated in the same
prohibited transaction, list on this
schedule the name, address, and SSN
or EIN of each disqualified person, other
than the disqualified person who files
this return.
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 invest­
ment advice. 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

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

Schedule D. Tax on Failure
to Meet Minimum Funding
Standards (Section
4971(a))

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.
­10­

If the IRS determined at any
time that your plan was a plan
CAUTION
as defined on Schedule C, 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
431(a) (or section 418B if a
multiemployer plan in reorganization),
enter the deficiency amount.
Line 2. Multiply line 1 by the applicable
tax rate shown below and enter the
result.
10% for plans other than
multiemployer plans.
5% for all multiemployer plans.
Additional tax for failure to
correct the accumulated funding
deficiency. When an initial tax is
imposed under 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 under
section 4971(b).
For this purpose, 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.
Report the tax for failure to correct
the accumulated funding deficiency in
Part I, Section B, line 8b.
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 less than 100 participants, an
annual normal cost of less than

$100,000, and 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.

Schedule E. Tax on Failure
to Pay Liquidity Shortfall
(Section 4971(f)(1))

year until the funding benchmarks are
met.
Similarly, a plan that is in critical
status and either fails to meet the
requirements of section 432 by the end
of the rehabilitation period, or has
received 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, will be treated as having an
accumulated funding deficiency for the
last plan year in such period and each
succeeding plan year until the funding
requirements are met.
In both cases, 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
either of the following occurs.
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 the plan year is less than 80%.
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.
All or part of this excise tax may be
waived due to reasonable cause.

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. Tax on
Excess Fringe Benefits
(Section 4977)

DRAFT AS OF
September 16, 2013
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. Enter the amount of the liquidity
shortfall(s) for each quarter of the plan
year.

Line 2. Enter the amount of any
contributions made to the plan by the
due date of the required quarterly
installment(s) that partially corrected the
liquidity shortfall(s) reported on line 1.
Line 3. Enter 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 in Part
I, Section B, line 9b.

Schedule F. Tax on
Multiemployer Plans in
Endangered or Critical
Status (Sections
4971(g)(3) & 4971(g)(4))

For years beginning after 2007, section
4971(g) imposes an excise tax on
employers who contribute to
multiemployer plans 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 the instructions
for line 10a, earlier.
Line 1. Under section 4971(g)(3), a
multiemployer plan that is in seriously
endangered status when it fails to meet
its applicable benchmarks by the end of
the funding improvement period will be
treated as having an accumulated
funding deficiency for the last plan year
in such period and each succeeding

Line 2. Under section 4971(g)(4), the
plan sponsor of a multiemployer plan in
critical status, as defined above, will be
liable for an excise tax for failure to
adopt a rehabilitation plan within the
time prescribed under section 432. The
tax is equal to the greater of:
The amount of tax imposed under
section 4971(a)(2); or
An amount equal to $1,100,
multiplied by the number of days in the
tax year which are included in the period
that 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

­11­

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 “Yes” on line 1 and complete
lines 2 through 4.
Line 3. Excess fringe benefits are
calculated 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 (2).

Schedule H. Tax on
Excess Contributions To
Certain Plans (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 excess
aggregate contributions made on behalf
of highly compensated employees. The
employer may also be subject to an
excise tax on 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
($105,000 for 2008) and, if the employer
so elects, was in the top-paid group for
the preceding year.
An employee is in the “top-paid
group” for any year if the employee is in
the group consisting of the top 20% of
employees when ranked on the basis of
compensation paid. An employee (who
is not a 5% owner) who has
compensation in excess of $105,000 is
not a highly compensated employee if

the employer elects the top-paid group
limitation and 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.

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 at www.irs.gov/irb/2003-32_IRB/
ar11.html.

requirement to give 204(h) notice was
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 on the
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 failure is provided or the failure
is corrected.

DRAFT AS OF
September 16, 2013
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 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. Tax on
Reversion of Qualified
Plan Assets to an
Employer (Section 4980)

Section 4980 imposes an excise tax on
an employer reversion of qualified plan
assets to an employer. Generally, the
tax is 20% of the amount of the
employer reversion. The excise tax rate
increases to 50% if the employer does
not establish or maintain a qualified
replacement plan following the plan
termination or 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:

Lines 1–4. Enter the date of 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%.

Schedule J. Tax on Failure
to Provide Notice of
Significant Reduction in
Future Accruals (Section
4980F)
Section 204(h) notice. Section 4980F
imposes an excise tax on an employer
(or, in the case of a multiemployer plan,
the plan) for failure to give section
204(h) 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
retirement-type subsidy. The tax is $100
per day per each applicable individual
and each employee organization
representing participants who are
applicable individuals for each day of
the noncompliance period. 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. (For plan years
beginning after December 31, 2007, the
­12­

Exceptions. The section 4980F
excise tax will not be imposed for a
failure during any period in which the
following occurs.
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; or
b. At the latest date permitted for
delivery of section 204(h) notice, the
person reasonably believed 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.
Generally, 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.
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. 2013-4,
2013-1 I.R.B. 123, as revised by
subsequent documents, available at
www.irs.gov/irb/2013-01_IRB/ar13.html,
for procedures to follow in applying for a
waiver of part or all of the excise tax due
to reasonable cause.

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 identifying number.
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.

individual circumstances. The estimated
average time is:
Recordkeeping . . .

30 hr., 22 min.

Learning about
the law or the
form . . . . . . . . . . .

15 hr., 45 min.

DRAFT AS OF
September 16, 2013
Line 4. A failure occurs on any day that
any applicable individual is not provided
section 204(h) notice.

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 Reduc­
tion 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

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

­13­

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

18 hr., 08 min.

If you have suggestions for making
this form simpler, we would be happy to
hear from you. You can send us
comments from www.irs.gov/
formspubs. Click on “More Information”
and then on “Comment on Tax Forms
and Publications.” Or you can also send
your comments to the Internal Revenue
Service, Tax Forms and Publications
Division, 1111 Constitution Ave. NW,
IR-6526, Washington, DC 20224. Do
not send the tax form to this address.
Instead, see Where To File, earlier.

Although we cannot respond
individually to each comment received,
we do appreciate your feedback and will
consider your comments as we revise
our tax forms and instructions.

Index

To help us develop a more useful index, please let us know if you have ideas for index entries.
See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

A
Amended return 3
Amount involved 5

Investment advice 10
L
Late filing 3
Interest 2
Penalty 3
Late payment 3
Liquidity shortfall:
Additional tax 11
Listed transaction 6

Penalty 2, 3
Late payment 3
Private delivery services 2
Prohibited allocation:
Disqualified person 5
ESOP 5
Nonallocation period 5
S corporation 5
Synthetic equity 5
Worker-owned
cooperative 5
Prohibited reportable
transaction 6
Prohibited tax shelter
transaction 6
Entity manager 6
Required disclosure
Prohibited transaction 7
Correcting 10
Correction period 10
Definition 8
Disqualified person 7
Exemptions 8
Failure to correct 9
Investment advice 10
Purpose of form 1

Terminated defined
benefit plan 12

DRAFT AS OF
September 16, 2013
C
Claim for refund 3

D
Disqualified benefit, funded
welfare plans 4
Disqualified person 10
Due dates 3
E
Eligible investment advice
arrangement 10
Employer reversion 12
Entity manager 6
ESOP 5
Prohibited allocations 5
ESOP dispositions 4
Excess contributions:
403(b)(7) plans 7
Section 4979 11
Excise tax due dates 3, 4
Extension 2
F
Form 5558 2
Funded welfare plans 4
I
Interest 2

M
Minimum funding standards,
failure 10

N
Nonallocation period 5
Nonallocation year 5
Nondeductible employer
contributions 6
Exception, defined benefit
plan 7
Exception, defined
contribution plan 7
Nondeductible
contributions 6
Qualified plan 6
Notice of significant
reduction in future
accruals 12
Applicable individual 12
P
Payment of taxes

Q
Qualified ESOP securities 5
R
Required disclosure:
Prohibited tax shelter
transaction
Reversion of qualified plan
assets 12
Qualified plan 12

­14­

S
S corporations:
Prohibited allocations 5
Section 403(b) plan 7
Section 4965 6
Section 4971(a) 10
Section 4971(b) 10
Section 4971(g) 11
Section 4971(g)(2) 6
Section 4971(g)(3) 11
Section 4971(g)(4) 11
Section 4972 6
Section 4973(a)(3) 7
Section 4975 7
Section 4976 4
Section 4977 11
Section 4979 11
Section 4979A 5
Section 4980 12
Section 4980F 12
Summary of taxes due 4
Synthetic equity 5
Amount involved 5
T
Table of due dates 3
W
When to file 2
Where to file 2
Who must file 1
Worker-owned
cooperative 5