PPA - change in PT rules

[JanetM]

Has anyone else read this one? PPA establishes a 14 day self correction period for fixing sec 4975 PT. Does this mean if you correct late contributions within 14 days of finding the missed/late contributions you don't need to file 5330?

Any help appreciated. Reading this stuff makes my head hurt.

[JanetM]

Section 635 of PPA. Has anyone looked at it?

[JanetM]

Anyone?

[Belgarath]

Sorry, but I don't even find a Section 635 of PPA.

Are you referring to is Section 612? And I don't read that to allow avoiding penalties for late submission of contributions - it is concerned with certain (not all!) transactions between the plan and a party in interest involving securities and commodities.

SEC. 612. CORRECTION PERIOD FOR CERTAIN TRANSACTIONS INVOLVING

SECURITIES AND COMMODITIES.

(a) Amendment of Employee Retirement Income Security Act of 1974.--

Section 408(b) of the Employee Retirement Income Security Act of 1974

(29 U.S.C. 1108(b)), as amended by sections 601 and 611, is further

amended by adding at the end the following new paragraph:

[[Page 120 STAT. 976]]

``(20)(A) Except as provided in subparagraphs (B) and ©, a

transaction described in section 406(a) in connection with the

acquisition, holding, or disposition of any security or

commodity, if the transaction is corrected before the end of the

correction period.

``(B) Subparagraph (A) does not apply to any transaction

between a plan and a plan sponsor or its affiliates that

involves the acquisition or sale of an employer security (as

defined in section 407(d)(1)) or the acquisition, sale, or lease

of employer real property (as defined in section 407(d)(2)).

``© In the case of any fiduciary or other party in

interest (or any other person knowingly participating in such

transaction), subparagraph (A) does not apply to any transaction

if, at the time the transaction occurs, such fiduciary or party

in interest (or other person) knew (or reasonably should have

known) that the transaction would (without regard to this

paragraph) constitute a violation of section 406(a).

``(D) For purposes of this paragraph, the term `correction

period' means, in connection with a fiduciary or party in

interest (or other person knowingly participating in the

transaction), the 14-day period beginning on the date on which

such fiduciary or party in interest (or other person) discovers,

or reasonably should have discovered, that the transaction would

(without regard to this paragraph) constitute a violation of

section 406(a).

``(E) For purposes of this paragraph--

``(i) The term `security' has the meaning given such

term by section 475©(2) of the Internal Revenue Code

of 1986 (without regard to subparagraph (F)(iii) and the

last sentence thereof).

``(ii) The term `commodity' has the meaning given

such term by section 475(e)(2) of such Code (without

regard to subparagraph (D)(iii) thereof).

``(iii) The term `correct' means, with respect to a

trans- action--

``(I) to undo the transaction to the extent

possible and in any case to make good to the plan

or affected account any losses resulting from the

transaction, and

``(II) to restore to the plan or affected

account any profits made through the use of assets

of the plan.''.

(b) Amendment of Internal Revenue Code of 1986.--

(1) In general.--Subsection (d) of section 4975 of the

Internal Revenue Code of 1986 (relating to exemptions), as

amended by sections 601 and 611, is amended by striking ``or''

at the end of paragraph (21), by striking the period at the end

of paragraph (22) and inserting ``, or'', and by adding at the

end the following new paragraph:

``(23) except as provided in subsection (f)(11), a

transaction described in subparagraph (A), (B), ©, or (D) of

subsection ©(1) in connection with the acquisition, holding,

or disposition of any security or commodity, if the transaction

is corrected before the end of the correction period.''.

(2) Special rules relating to correction period.--Subsection

(f) of section 4975 of such Code (relating to other definitions

and special rules), as amended by sections 601 and 611, is

amended by adding at the end the following new paragraph:

``(11) Correction period.--

[[Page 120 STAT. 977]]

``(A) In general.--For purposes of subsection

(d)(23), the term `correction period' means the 14-day

period beginning on the date on which the disqualified

person discovers, or reasonably should have discovered,

that the transaction would (without regard to this

paragraph and subsection (d)(23)) constitute a

prohibited transaction.

``(B) Exceptions.--

``(i) Employer securities.--Subsection (d)(23)

does not apply to any transaction between a plan

and a plan sponsor or its affiliates that involves

the acquisition or sale of an employer security

(as defined in section 407(d)(1)) or the

acquisition, sale, or lease of employer real

property (as defined in section 407(d)(2)).

``(ii) Knowing prohibited transaction.--In the

case of any disqualified person, subsection

(d)(23) does not apply to a transaction if, at the

time the transaction is entered into, the

disqualified person knew (or reasonably should

have known) that the transaction would (without

regard to this paragraph) constitute a prohibited

transaction.

``© Abatement of tax where there is a

correction.--If a transaction is not treated as a

prohibited transaction by reason of subsection (d)(23),

then no tax under subsections (a) and (b) shall be

assessed with respect to such transaction, and if

assessed the assessment shall be abated, and if

collected shall be credited or refunded as an

overpayment.

``(D) Definitions.--For purposes of this paragraph

and subsection (d)(23)--

``(i) Security.--The term `security' has the

meaning given such term by section 475©(2)

(without regard to subparagraph (F)(iii) and the

last sentence thereof).

``(ii) Commodity.--The term `commodity' has

the meaning given such term by section 475(e)(2)

(without regard to subparagraph (D)(iii) thereof).

``(iii) Correct.--The term `correct' means,

with respect to a transaction--

``(I) to undo the transaction to the

extent possible and in any case to make

good to the plan or affected account any

losses resulting from the transaction,

and

``(II) to restore to the plan or

affected account any profits made

through the use of assets of the

plan.''.

© <<NOTE: 26 USC 4975 note.>> Effective Date.--The amendments made

by this section shall apply to any transaction which the fiduciary or

disqualified person discovers, or reasonably should have discovered,

after the date of the enactment of this Act constitutes a prohibited

transaction.

[[Page 120 STAT. 978]]

[JanetM]

Opps, CCH section 635 and PPA section 612.

Question still stands, do you read the 14 day correction period to mean make the following change. If you have PT due to not timely depositing deferrals and fix (fund lost earnings) in 14 days there is no need to file 5330?

[Belgarath]

No, I absolutely do not read it to allow this. No way, no how, nyet!

[Guest Pension Girl]

PPA added ERISA 408(20) and IRC 4975(d)(23) to exempt any prohibited transaction other than the self However, I believe