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Employee Plans Compliance Unit (EPCU) - Completed Projects - Projects with Summary Reports – Money Purchase Pension Plan Contributions Project

Overview

The Employee Plans Compliance unit (EPCU) identified calendar year 2012 money purchase plans filing a Form 5500-SF as a small plan that reported no contributions and contacted a sample of the sponsors to determine the reason for the lack of contributions.

Money purchase pension plans (MPPP) must have a definitely determinable benefit formula; typically, the formula expresses the benefit accrual in terms of a percentage of compensation. For sponsors that have only one plan, failing to make the contribution required by the plan’s formula indicates that the plan sponsor may not be following the terms of the plan document and may need to correct the plan to retain its qualified status.

Results

The EPCU reviewed responses, compiled response data, and closed cases based on various outcomes, such as:

  • Plan was a prevailing wage plan and either didn’t have any prevailing wage contracts in 2012, or if it did, satisfied the Davis Bacon Act by paying employees the prevailing wage* (see table below).
  • Sponsor failed to follow the terms of the plan document by not contributing to the plan
    • Current year
    • Subsequent year(s)
  • Plan administrator entered no (or incorrect) information
  • Sponsor didn’t respond
  • Correspondence was undeliverable and the EPCU couldn’t locate taxpayer

The majority of cases complied with the MPPP contribution requirement because they were either amended or set up with a 0% contribution formula. Some of the plans with no self-employment earnings or earned wages indicated that the participant(s) retired and they were holding the plan assets until they met one of the plan’s allowable distribution events.

Results Table

Unable to Locate 2 2%
Frozen Plan with 0% Contribution Formula 25 26%
0% Contribution Formula – Accepted a Defined Benefit rollover 9 10%
No Self-Employment Earnings or Earned Wages 10 12%
* Prevailing Wage Plan; Sponsor Paid No Prevailing Wages 21 22%
Puerto Rico Plans 2 2%
Amended Return Secured to Correct Pension Feature Code or Contributions Amount 15 15%
Other Corrections (i.e. updated address information) 8 9%
Referral for Audit 1 1%
Voluntary Compliance Application Submission 1 1%
Total 94 100%

 

Page Last Reviewed or Updated: 16-Dec-2016