Low excise tax on deferrals, give it to the partic and no 5330?

[BG5150]

I've seen anecdotes where if the excise tax on late deferrals is low (either gross amount is $100 and $15 tax or the tax amount is less than$100, I forget), then you can just add the excise tax to the earnings and not file a 5330.

Is that true?  Or is this just an urban legend?

[D Lewis]

See this Link for a prior discussion: http://benefitslink.com/boards/index.php/topic/48332-late-deposits/#entry211802

The guidance is informal and never been confirmed that I know of, but we give the amount of the excise tax to the participants as extra lost earnings if the amount is small. Just don't ask me what small or de minimis is.

[Bill Presson]

We've recommended that to our clients for a number of years and never had any issues on IRS audit or DOL investigation. Your mileage may vary.

[Flyboyjohn]

This is addressed in the DOL VFCP and PTE 2002-51.

You can only give the excise tax amount to the participants and not file a 5330 if:

1. The excise tax is $100 or less

2. You make a VFCP filing with DOL.

3. As part of the VFCP filing you provide the DOL a copy of the 5330 you would have filed with IRS but for this exception.

IMHO I'd rather file the 5330 and pay the tax.