4975 (a) amount involved calculation

[R. Butler]

I am attending a employee benefits conference this week in Cincinnati. Martin Pippins from the IRS stated that the DOL & IRS differ on how to calculate the "amount involved". The IRS position is that the "amount involved" is the interest & the DOL position is that it is the principal. He indictaed that guidance would be issued within the next few weeks, but would not tell what the guidance was going to say. Has anyone heard what that guidance will say?

Thanks in advance

[Ron Snyder]

I am interested in the principle they enunciate.

[Kirk Maldonado]

I'm not sure why the DOL has jurisdiction over this issue, inasmuch as the term "amount involved" does not even appear in ERISA.

Furthermore, the IRS issued a temporary regulation back in 1976 defining the term "amount involved" by reference to the private foundation regulations. Reg § 141.4975-13. It seems kind of odd that the DOL would want to change a definition that has been in use for 30 years.

At a bare minimum, the DOL would have to promulgate regulations to do that. Given the speed at which they draft regulations, I don't think we'll see that in our lifetimes.

[R. Butler]

Supposedly guidance is imminent. I really didn't even know there was an issue until the conference.

On a better note Sal Tripodi mentioned in his presentation that the DOL will likely issue a safe harbor time frame for remitting deferrals. He thought that the safe harbor would be somewhere between 5-10 days. If deferrals were deposited within that time frame they would be deemed reasonable. Mr. Tripodi thought that the guidance would come out around September.

[R. Butler]

Good news. The IRS released Rev. Rul. 2006-38 essentially stating that for purposes of calculating the excise tax under §4975 amount involved is the only the interest.