IRC 4980(d) Excess Asset Transfer

[JAY21]

Any opinions on whether if you want to transfer excess assets from a DB plan to say a profit sharing plan under IRC 4980(d)(2) do you need to file a Form 5310-A (advance 30 day notice of transfer or assets or liabilities) with the IRS ?? It's not clear to me from the instructions for this form if this type of the transfer is of the type that triggers this kind of filing requirement.

[david rigby]

I'll try. Agree that the instructions do not answer your question. I also reviewed the Gray Book; nothing on point.

Although it's been many years since I did this, my action would be to err on the side of caution and file the Form 5310A. Even if not needed, I don't think it would hurt.

[chc93]

We had this situation a couple of years ago. We (along with the attorney for the plan) reviewed 5310-A, and decided that this form is for a transfer of assets with associated benefits. Excess assets from a DB plan is really an employer reversion, but the excise tax is waived if at least 25% of the excess is "transferred" to a DC plan. In our case, 100% of the excess assets were transferred to the DC plan, and allocated there (we didn't work with the DC plan). So we didn't file a 5310-A. Note that the plan got an IRS DL for the plan termination and successfully completed the PBGC audit.

[JAY21]

Interesting analysis chc93, and it makes sense to me. I've previously filed these but recently got burned on one where the client jumped the gun and distributed before the 30 days was over so the IRS is proposing $25 late filing penalty on the 5310-A filing, so no good deed (conservative filing approach) goes unpunished and I'm not even sure the filing was needed in the first place. Got burned playing it safe. Guess we'd better play the game better or decided there is an argument to not file at all.

[chc93]

JAY21... your experience is interesting. You say that the IRS "is proposing" a late filing penalty. Was the penalty paid? If so, is the IRS therefore saying that the 5310-A was required in cases like this where excess assets from terminated DB plans are transferred to DC plans?

[JAY21]

We're in the process of responding to the IRS on this one. I'm thinking of making that case that the form was not required in the first place though obviously we chose to file it so we're kind of arguing against ourselves. I'll let you know how it goes.

[chc93]

JAY21... thanks, and will be interested in the outcome. I discussed this further in our office, and the general thought was that the 5310-A was really for mergers/aqusitions and spinoffs. So shouldn't apply to DB excess assets transferring to DC plans.