Money Purchase or not?

[Guest 5500]

Having trouble with 5500 question 8(a) for a multiemployer (Taft-Hartley) "annuity plan". I've considered it to be money purchase plan since contributions are not discretionary and are spelled out under the plan and the CBA. Also, I don't believe Taft Hartley MP plans are subject to Sec. 412 minimum funding standards.

With EFAST, answering 2C for MP plan results in an error for not completing Sch R line 6, which I believe does not apply. Instructions do not indicate that question 8a is only for purposes of Sec 412, so I have always used MP designation. This doesn't work anymore. How should this be handled?

I am using this board instead of multiemployer board hoping for more responses.

Thanks

[RTK]

A multiemployer plan can be a money purchase pension plan or a profit sharing plan. Under Code section 401(a)(27), the plan must designate what type of plan it is. It does not make any difference whether contributions are discretionary. If a money purchase pension plan, a multiemployer plan is subject to 412 minimum funding standards, which presents fairly ugly issues with respect to delinquent contributions. This fact alone warrants converting a multiemployer mp plan to a ps plan.

[Guest 5500]

I'm aware of the MP v. PS designation you refer to but understood that even if it is a MP plan under the 401(a)(27)(B) designation, it was not subject to minimum funding standards under 412. I am basing this on the Conference Committee Explanation to PL-93-406 which introduced Sec 412.

In summary, it says that for purposes of minimum funding, Taft-Hartley plans that provide a specified level of contributions are not to be considered money purchase plans if the employer or his representative participated in the determination of the benefits. I have understood this to mean it would be considered a MP plan for all purposes except for minimum funding standards.

Problem is that the 5500 does not offer a choice for plans considered money purchase for other purposes, but not money purchase for purposes of Sec 412.

[RTK]

My copy of the conference report provides that "For purposes of this rule, a plan (for example, a so-called Taft-Hartley Plan) which provides an agreed level of benefits and a specified level of contributions during the contract period is not to be considered a money purchase pension plan if the employer or his representative participated in the determination of benefits." Because of the reference to "an agreed level of benefits and a specified level of contributions," it is not clear to me that this was intended to remove this type of plan (whether or not Taft-Hartley) from the minimum funding standards. The intent could have been to make sure that this type of plan would be treated as a defined benefit plan, even if the employer negotiated a cents per hour contribution.

In any case, there is nothing in the Code (or any guidance that I have seen) that states a money purchase pension plan is not subject to minimum funding standards if a multiemployer plan, which makes me a little nervous on relying on not necessarily clear legislative history.

I did misspeak in laying all of the delinquent contribution woes on the minimum funding standards. Under IRS audit guidelines for multiemployer plans, the IRS states its position that a pension plan under which the allocation of contributions or a service credit is conditioned on an employer making the required contributions violates the definitely determinable benefit rule.

Unfortunately, I can't help with 5500 directly, since I have managed to avoid them.