Employee Plans Compliance Unit (EPCU) - Current Projects - IRC 501(c)(18) Plans |
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Background
We are contacting taxpayers who are exempt from income tax under Internal Revenue Code section 501(c)(18) or who filed Form W-2 for employees who contribute to such plans. This Code section describes certain retirement trusts formed prior to June 25, 1959. In order to maintain tax exemption, these trusts must meet a number of requirements. The trust must have been properly formed (as a written document) under local law and the character or nature of the trust and (including it’s beneficiaries) must have remained unchanged. The related retirement plan must be funded only by employee contributions, must not discriminate in favor of highly compensated employees, and must state that its assets may only be used to provide plan benefits and may not be used for other purposes. Employee deferrals to these plans are limited to $7,000 per year, which comprises part of the annual aggregate deferral limit provided by Code sections 401(k), 403(b), and 501(c)(18) elective deferrals.
The Project Process
We selected all entities classified in IRS Master Files as exempt under Code section 501(c)(18). We also selected a representative sample of entities who filed at least one Form W-2 that listed an elective salary deferral to such a trust. Finally, we identified some employees who appear to have excess deferrals. We will be corresponding with these employers and employees to gather information needed to understand their IRC 501(c)(18) plans. Our primary goals are to verify that the trust (and the related plan) is compliant with the Code and that related tax, information, and wage reports are complete and accurate.
If You Receive A Letter
Please provide the information requested. You may also furnish any other documents or clarifying material that you believe will be helpful for us to review. You should make every effort to be as complete and accurate as possible in your responses. This is a compliance check. We will not inspect your books and records to determine a tax liability for a particular tax period. Failure to respond will not, of itself, be cause for an audit; however, a lack of information regarding a plan or trust may necessitate other measures to obtain knowledge of the nature and operation of the arrangement.
If You Have Questions
Please feel free to e-mail us and we will be glad to answer any questions you have about the project and how it relates to you. Please include the “IRC 501(c)(18) Project” in the Subject line of the message.
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Page Last Reviewed or Updated: March 11, 2009