Corp pays WD then reimbursed from trust

[Penman2006]

The plan sponsor of a DB plan wants to pay the mandatory federal and state withholding on distributions "as a 945 tax" (per the CPA) and then the corporation gets reimbursed from the trust. I assume that means that they just want to submit the pension distribution withholding along with their payroll taxes. Is that a problem? A prohibited transaction?

[david rigby]

Doesn't the plan and/or trust have its own EIN?

[Penman2006]

The trust has it's own EIN of course and that is one concern.

[david rigby]

The plan is the payor, not the ER. Doing the payment that way seems so much cleaner.

Is there an advantage to making the paper trail more complex?

[Penman2006]

I'm on your side 100%, however, this way seems to be easier for the plan sponsor, at least they think so.

[WDIK]

at least they think so.

...until IRS deposit records don't match up with the 945 filings.

[K2retire]

The plan sponsor of a DB plan wants to pay the mandatory federal and state withholding on distributions "as a 945 tax" (per the CPA) and then the corporation gets reimbursed from the trust. I assume that means that they just want to submit the pension distribution withholding along with their payroll taxes. Is that a problem? A prohibited transaction?

Regardless of whether the plan or the employer pays the withholding it is still a 945 tax.

Where I used to work the plan's custodian wrote a check to the employer for the withholding. That way the employer had a canceled check without having to open a checking account. The deposit was still made using the plan's EIN.

[Belgarath]

While you should check with an ERISA attorney, this may fall within the parameters of Prohibited Transaction Exemption 80-26, as subsequently modified by 2000-14, 2002-13, 2002-14. Might be considered an acceptable interest free loan.

[Guest Jennyb473]

We have always done it this way - the custodian will not file 945 deposit for our accounts because they are omnibus accounts and they do not do any reporting (that is what we are for). So the custodian issues check to the employer, employer deposits and makes 945 deposit to IRS using trust EIN, if applicable. We have recently been able to set up EFTPS using the trust account as the bank account so we are now able to skip the step of having check issued to employer and then having them make deposit. It saves time, is smoother and so far so good.