New User Fee and Small Plans

[mwyatt]

The IRS has raised the User Fee for 5310 filings from $250 to $1,000, effective for filings postmarked February 2006. Interesting that a one-person plan will pay the same fee as a 10,000 life plan.

Given the sensitivity of small clients to costs, will be interesting to see how this increase in the user fee is received (one guess). I know we'll be busy getting whatever we can get out prior to the end of month deadline.

And I'm sure that more clients will opt out of the determination letter process and terminate without a letter.

[Guest mjb]

What if the plan is terminated more than 3yrs after the last contribution is made? If its audited there is no loss of deduction to the employer because the s/l has expired. If the plan is amended for all applicable requirements in the yr it is terminated what is the DQ risk if it is audited at a later date?

[Bird]

I believe that increase is effective 7/1/06.

I agree that it will have an effect on the number of filings. Frankly, I've always thought the real value of an FDL on termination was pretty low, but it made everyone feel better so we've always recommended it and generally the client agreed. Now, I will be less reluctant to say "ok" to the client who doesn't want to do it.