BENEFITSLINK NEWSLETTER 3/13/96
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TWO MINUTE WARNING ...
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 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 on or
before this Friday (March 15), 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 such a plan submits a voluntary CAP application after Friday, 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 via internet.)
Plans that have a plan year ending January 31 generally have until April
15, 1996 to make a filing and get the 20% worst-case cap; plan years
ending February 28 have until May 15, etc., because the deadline (per
the memorandum) is 15 months after the close of the sponsor's "remedial
amendment period."
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DOCUMENT SERVICE NOW ONLINE
Employers and service-providers who wish to obtain an IRS-approved
prototype document for use in creating tax-qualified pension or
profit-sharing plans, or in restating existing plan documents, now can
order a plan document online from BenefitsLink. The document does not
require investments to be placed with any particular financial
institution. An online questionnaire for use with Web browsers appears
at:
http://www.magicnet.net/benefits/documents
The computer-printed adoption agreement and accompanying basic plan
document are prepared by BenefitsLink, placed in a notebook and then
shipped to the customer.
Also available is a Summary Plan Description and complete set of
administrative forms, matching the specifications in the adoption
agreement.
Proceeds from the document service will be used to pay the costs of
operating BenefitsLink, and any profits left over will help send a kid
to college