4975 Excise Taxes Applicable to 403(b) Plans?

[Guest Aaron Pierce]

Am I correct in my understanding that the excise taxes under Code Section 4975 do not apply to a 403(b) plan?

A 403(b) plan is not among the types of arrangements specifically listed as a "plan" under 4975(e)(1). It is also not listed in the instructions to Form 5330 as a plan subject to Code Section 4975. The Internal Revenue Manual also does not list a 403(b) plan as being subject to 4975. However, I have been unable to find anything that affirmatively states that 4975 does not apply to a 403(b) plan.

My specific issue is whether the excise tax applies for late remittance of participant contributions to an ERISA-covered 403(b) plan. Certainly, the ERISA penalties (20% under ERISA 502(l) and 5% under ERISA 502(i)) could apply, but it looks like the Code Section 4975 excise tax does not.

Any thoughts?

Thanks.

[Guest mjb]

Why isnt the express language of 4975(e)(1) sufficient to affirmatively exclude 403b plans since a 403b plan is not a qualified plan, an IRA or any of the types of health IRAs listed?

[Guest Aaron Pierce]

Why isnt the express language of 4975(e)(1) sufficient to affirmatively exclude 403b plans since a 403b plan is not a qualified plan, an IRA or any of the types of health IRAs listed?

It probably is sufficient. However, I had never picked up on the exclusion of 403(b) plans from the excise tax provisions of 4975 before and want to be sure that I am not missing anything. From the research I've done, it certainly looks like 4975 does not apply. I won't try to guess the policy reason for excluding 403(b)'s from coverage.

Thanks for the reply.

[BeckyMiller]

In the original message, you noted that it was an ERISA covered 403(b) plan. In that case, there is a parallel provision for the excise tax in ERISA Section 502(i). This section has not been amended over the years, so it remains at the original 5 percent penalty level.