Excise Tax on DB Funding Deficiencies

[Guest Powers]

I am getting conflicting information and I was hoping someone could help demystify theexcise tax on funding deficiences. My background is in DC administratioin so I am very green with DB issues. I am wanting some insight or a cite that tells me if the % is 5 or 10 and how it relates to the single and Multi employer. I read 10% in some places and 5% in another. I am not sure if I was reading outdated information because the regs have changed.

Any help would be greatly appreciated.

[SoCalActuary]

Here is the IRC section as currently posted by thomas.loc.gov

Sec. 4971. Taxes on failure to meet minimum funding standards

-STATUTE-

(a) Initial tax

For each taxable year of an employer who maintains a plan to

which section 412 applies, there is hereby imposed a tax of 10

percent (5 percent in the case of a multiemployer plan) on the

amount of the accumulated funding deficiency under the plan,

determined as of the end of the plan year ending with or within

such taxable year.

(b) Additional tax

In any case in which an initial tax is imposed by subsection (a)

on an accumulated funding deficiency and such accumulated funding

deficiency is not corrected within the taxable period, there is

hereby imposed a tax equal to 100 percent of such accumulated

funding deficiency to the extent not corrected.

© Definitions

For purposes of this section -

(1) Accumulated funding deficiency

The term ''accumulated funding deficiency'' has the meaning

given to such term by the last two sentences of section 412(a).

(2) Correct

The term ''correct'' means, with respect to an accumulated

funding deficiency, the contribution, to or under the plan, of

the amount necessary to reduce such accumulated funding

deficiency as of the end of a plan year in which such deficiency

arose to zero.

There is more in the code to clarify the issues, and I recommend you research it.

[AndyH]

Why is a multiemployer deficiency only 5%? Is the UAL plan in the news a multiemployer? That ought to start a discussion.

[Guest Powers]

Thanx SoCalActuary! This was exactly what I needed to start my research!

[Effen]

Andy,

I'm not sure about UAL, but I believe most of the airline plans are collectively bargained single employer plans.