BENEFITSLINK NEWSLETTER 3/13/96 ERRATA ****************************************************************** TWO, NO MAKE THAT FIFTEEN, MINUTE WARNING ... Below is the corrected and improved text of the Newsletter mailed earlier today. (1) I don't know why I said the 15th of this month is the deadline for calendar year plans; I must have the number 15 on my brain! The deadline is the END of the fifteenth month after the remedial amendment period. (2) The special IRS program is not yet important to tax-exempt employers (including churches) or governmental entities, even if they sponsor tax-qualified pension or profit sharing plans, because the deadline for making plan amendments to such plans has not yet passed. --DRB ****************************************************************** Qualified pension and profit-sharing plans that were not timely amended for TRA 1986 or subsequent legislation (e.g., the $150,000 cap or the direct rollover rules) that operate on a calendar year (plan year) might wish to apply for a "closing agreement" under which the plan sponsor pays a nondeductible sanction amount in exchange for the IRS agreeing not to take away the plan's tax-qualified status. Most calendar year plans sponsored by private employers had to be amended by December 31, 1994 to incorporate certain changes in the tax laws. If an application under "voluntary CAP" is submitted to the IRS for a calendar year plan on or before the end of this month (March 31), the worst case sanction will be 20% of the amount the IRS could have collected if the problem were discovered on audit, according to a "Memorandum to Field Offices" issued to the various IRS key districts by the IRS National Office on October 17, 1995. (The memorandum is published on the internet at http://www.magicnet.net/benefits/articles/field.html) If a calendar year plan submits a voluntary CAP application after March 31, the worst case scenario rises to 40% of the amount the IRS could have collected if the problem were discovered on audit; 40% is the usual cap in voluntary CAP cases, as described in Revenue Procedure 94-16, 1994-1 C.B. 576. (That revenue procedure contains details about the mechanics of the program; it is not yet available on the internet.) Plans that have a plan year ending on January 31 generally have until the end of April, 1996 to make a filing and get the 20% worst-case cap; plans with a February 28 plan year end generally have until the end of May, etc., because the deadline (per the memorandum) is 15 months after the close of the plan's "remedial amendment period." The remedial amendment period for pension and profit-sharing plans sponsored by governmental entities or tax-exempt organizations has not yet ended, so the National Office memorandum is not yet important to such plan sponsors. (Tax-exempt organizations and some church plans have until the end of the plan year that begins in 1997; governmental entities and most church plans have until the end of the plan year that begins in 1999; see IRS Announcement 95-48, not yet on the internet.) ****************************************************************** The BenefitsLink Newsletter is free; to subscribe or unsubscribe, send email to Dave Baker at erisa@magicnet.net. The mailing list is not sold or otherwise made available to third parties.