Notice 2001-103

As we reported in a previous e-mail last month, the IRS is waiting on Congressional action to grant the IRS the authority it needs to extend the September 15th minimum funding deadline. Unfortunately, Congress has yet to act on this issue since it is still working on the tax portion of the relief and stimulus package in light of the terrorist attack.

In the meantime retirement plan practitioners are trying to complete 5500 Forms by the October 15 deadline. The problem is that if the minimum funding contribution was made after September 15 because the markets were closed, there is no guidance on how to complete the Schedule B. As we previously reported, after Congress acts, its the intent of the IRS to extend the September 15 deadline to September 24, with a longer extension for sponsors more directly affected by the attack.

We have been discussing the Schedule B issue with IRS and DOL over the past week. Unfortunately, they have been hampered by the delay in Congressional action. After discussions among the IRS, DOL, and PBGC over the past few days, they issued Announcement 2001-103 late Friday. The complete text of the announcement is reproduced below at the bottom of this e-mail.

Basically, the announcement provides that a Schedule B will not be treated as being filed incorrectly if the Schedule B shows the minimum contribution being made on or before September 24th. In other words, no special disclosure or attachment will be required. Similar relief is given for PBGC premium purposes.

As stated earlier, sponsors and advisors more directly affected by the attack will get a further extension. These sponsors also get a further extension of the 5500 filing deadline pursuant to guidance issued by the DOL. When Congress finally passes the authorizing legislation, IRS expects to quickly release more formal guidance on all of these extensions.

I recognize this process is frustrating. Please be assured that ASPPA is working closely with the agencies to expedite matters as much as possible. However, the agencies can only operate within the confines of what the law allows, and that is why we are still waiting for clear comprehensive guidance on this.

Brian Graff
ASPPA Executive Director

Notice 2001-103

Part IV. – Items of General Interest
Announcement 2001-103

The Internal Revenue Service (IRS), the Department of Labor's Pension and Welfare Benefits Administration (PWBA), and the Pension Benefit Guaranty Corporation (PBGC) provide relief from certain penalties relating to Forms 5500 for defined benefit and money purchase pension plans that are required to be filed on or before October 15, 2001. This announcement also includes PBGC’s statement of relief from penalties relating to premiums, reporting and disclosure, and certifications.

Background
Section 412(a) of the Internal Revenue Code (Code) and § 302(a) of the Employee Retirement Income Security Act of 1974 (ERISA) provide that a plan meets the minimum funding standards of the Code and ERISA for a plan year if the plan does not have an accumulated funding deficiency as of the end of the plan year. Section 412(c)(10) of the Code and § 302(c)(10) of ERISA provide that, for purposes of satisfying the minimum funding requirements of the Code and ERISA, any contributions for a plan year made by an employer by the end of the 8½ month period following the end of such plan year are deemed to have been made on the last day of the plan year.

Section 6058 of the Code and § 104 of ERISA require plan administrators to file an annual return/report of employee benefit plan within a specified period of time after the end of the plan year. The annual return/report of employee benefit plan is Form 5500 and Form 5500-EZ (hereinafter Form 5500). For defined benefit pension plans subject to the minimum funding standard, § 6059 of the Code requires that a periodic report of the actuary be filed with the annual return. Under § 301.6059-1 of the Procedure and Administration Regulations, the periodic report is the Schedule B, which must be signed by an enrolled actuary. In order to properly complete the Schedule B, the enrolled actuary must know whether a contribution for a plan year was made within the period specified by § 412(c)(10) of the Code and § 302(c)(10) of ERISA.

Under section 502(c)(2) of ERISA, a penalty of up to $1,100 a day may be assessed for each day a plan administrator fails or refuses to file a complete and accurate annual report and accompanying schedules. Similarly, § 6652(e) of the Code imposes a penalty of $25 a day (up to $15,000) for not filing returns for certain deferred compensation plans. Section 6692 of the Code imposes a penalty of $1,000 for not filing an actuarial report described in § 6059. Under § 301.6692-1(a) of the regulations a failure to provide a material item of information is considered as a failure to file an actuarial report.

Because of the disruption of the financial markets caused by the events of September 11, 2001, many employers have stated they were not able to make required contributions to their pension plans on or before September 15, 2001, to satisfy the minimum funding standards.

Grant of Relief
The IRS, the PWBA, and the PBGC provide the following relief. In the case of a defined benefit or money purchase pension plan with a plan year ending on or after December 27, 2000, and on or before January 8, 2001, for which a Form 5500 is required to be filed on or before October 15, 2001, plan administrators and plan sponsors will not be treated as failing to file a complete and accurate return/report under § 6058 of the Code or § 104 of ERISA, nor will enrolled actuaries be treated as failing to file an actuarial report that satisfies the requirements of § 6059(b) of the Code, solely because contributions made on or before September 24, 2001, are included on line 3 of Schedule B of Form 5500 (showing the actual date of payment of the contribution) and line 6(b) of Schedule R of Form 5500.

In addition, the PBGC provides the following relief with respect to any plan with a plan year ending on or after December 27, 2000, and on or before January 8, 2001. The PBGC will not assess any penalties for a failure to pay PBGC premiums in a timely manner or a failure to meet a PBGC reporting or disclosure requirement, nor will it treat a certification as failing to be a valid and correct certification, solely because contributions made on or before September 24, 2001, are included in the plan's assets for purposes of PBGC premiums or are counted for purposes of determining whether any PBGC reporting or disclosure requirement applies.