4980F Excise Tax Waiver

[HollyB]

Does anyone know of a way to get the excise tax under IRC 4980F for a late 204(h) notice waived other than a letter ruling request? I can’t find any other way to get a waiver and the user fee is too high to make a letter ruling request a viable option. Thanks.

[Effen]

Are you saying the IRS is assessing a fine for a missed notice, or are you concerned you might get fined for a missed notice?

 

[HollyB]

I'm trying to find out if there's a way to either justify not filing a 5330 or file the 5330 without payment and request a waiver of the excise tax, which is quite significant, especially for an owner plus one employee plan.  Everything I've found says the only way to get out of the excise tax is to request a waiver through a PLR request and the filing fee for a PLR is too high to make that a viable option.  No tax has been assessed.

[Effen]

Can you provide more information about the situation.  Is this a 2 participant plan - owner and EE, or did  you just miss one EE with the 204(h)?  It is difficult to provide advice without knowing more about the specifics of what happened. 

You could argue the owner was informed when he decided to freeze the plan.  For the one EE, maybe its easier to notify them now, and give them the accrual from the intended freeze date until the notification date.  Could be a lot easier/cheaper than dealing with a 5330.

[HollyB]

It's the owner and one employee.  It's an S Corp. so technically the owner is an employee too.  The DB plan was terminated 12/31/17 and written notice was given 12/30/17.  Verbal notice was given to the employee in mid-November but the regs. say it has to be written, which the consultant working with the employer didn't realize until about a week before the notice was given.  By my calculation, that makes the excise tax $2800, which the business can't afford, but it's too small an amount to justify a PLR waiver request given the user fee for that.  That's why I'm trying to see if there's another way to get the tax waived.  The owner switched TPAs for 2018, so it took the new TPA about 5 days to prepare the notice and send it to the consultant for review.  The consultant did the review and sent it to the employer the same day.  The plan was way overfunded at termination and those assets were allocated to the owner and employee.  I believe the 2017 accruals were calculated using full year compensation so I don't think there would be any additional accrual for the period from when the notice should have been given to when it was.  Let me know if you have further questions about what occurred.  Thanks.

[Effen]

Consider changing the date of termination to be 15 days after the notice was given.  That may create the need to do one more valuation and SB, but  the over funded plan could pay those expenses.