jw721

We prepared a 2021 Form 5330 for a client who had late deposits. For several reasons, we did not prepare it until December 2022 but we calculated the interest/excise tax through 12/31/2022. They will also need a 2022 Form 5330, which I believe we could have included the 2021 info on that for only one filing, but we elected to do two separate filings. The client remitted the form (along with excise tax payment) fairly quickly; the IRS apparently received these on Jan 9, 2023. I know this because they actually sent our client a letter assessing penalties. Granted, the amount is quite small (< $10) but I have never heard of a late 5330 letter being sent by the IRS. Has anyone else heard of their clients receiving a late 5330 letter, ever? I know the IRS is beefing up their staff and perhaps now have employees eager to take action on things like this. Also, could the client have avoided a penalty if we had done a combined reporting on one 2022 Form 5330? Thanks!

How did this end up working out? I have a prospective church client in an identical situation. It doesn't sound like they ever elected ERISA coverage but their previous TPA had been filing 5500s on their behalf. They are now close to losing audit exemption due to high employee count and don't have the resources to pay for an audit. Thanks!

For our 401(k) plans, we do not do a coverage test if certain conditions apply: no HCE’s, no NHCE’s, only collectively bargained employees benefit, no last day requirement, exclude only union/nonresident aliens, no controlled groups (or all participate), exclude only Termed with < 501 hours. Do any of these exceptions apply to a 403(b) 410(b) coverage test? Are the exceptions identical or are there some that apply only to 401(k) or 403(b)? I don’t want to be running a 410(b) test in a 403(b) plan if I don’t need to. Thanks!

What about adding a nonelective contribution source to the 403(b) plan and freezing or terming the 401(k) plan? Fees could be prohibitive to this option but it may end up being less expensive than a SH contribution. Some sponsors don't like matching for people who have terminated either which is what happens with SH contributions.

Having a written plan in place does not automatically make a church plan subject to ERISA. My understanding is that a church plan can have a written document yet still elect to not be covered by ERISA. Incidentally, why would a true church plan with the reliances mentioned in Peter's post elect to be covered by ERISA?