Hi, ALL defined benefit plans that do not satisfy minimum funding requirements are subject to excise taxes.
Ad since 2007 this is true for single member plans as well
This is a distinguishing element of DB plans, that the plan, as an obligation to it's participants, and the sponsoring employer as a creditor the the plan must meet minimum funding requirements ... only in DC (Defined Contribution plans) is this risk borne by the participants
The IRS has also provided guidance for single-employer, multiple employer and multiemployer plans regarding
interest and excise taxes on late payments. See this: http://www.law.cornell.edu/uscode/text/26/430
Here's the IRS guidance on this: http://www.irs.gov/Retirement-Plans/EP-Examination-Process-Guide---Section-2---Compliance-Monitoring-Procedures---Top-Ten-Issues---Defined-Benefit-Plans
Because the plan is defined by it's promised future benefit, DB plans must provide for a minimum funding level as defined by the design and type of plan
Note: The IRS has a system of correction programs for sponsors of retirement plans, including defined benefit plans, which are intended to satisfy Internal Revenue Code requirements but have not met the requirements for a period of time. This system, the Employee Plans Compliance Resolution System (EPCRS), permits employers to correct plan failures and thereby continue to provide their employees with retirement benefits on a tax-favored basis.
From the IRS FAQ on retirement plans:
If your plan is a money purchase pension plan or a defined benefit plan, has it complied with the minimum funding requirements of section 412? Check that appropriate contributions were made to the plan.
If your plan is a defined benefit plan, an enrolled actuary will have to compute the funding required for the plan and sign Schedule B of Form 5500 setting out the plan's funding status. If your plan is a money purchase pension plan, the contributions required by the plan document must be made in order to satisfy the minimum funding requirements of section 412.
You'll see that here:http://www.irs.gov/Retirement-Plans/A-Guide-to-Common-Qualified-Plan-Requirements#19
I am a CFP and A CRPS (Chartered Retirement Plans Specialist). The only reduction that can be used for funding can be found in subsection (f), where prefunding is used. See this:
(f) Reduction of minimum required contribution by prefunding balance and funding standard carryover balance
I still don't see you coming into the chat session, so I'll move us to the "Q&A" mode. … Maybe that will help … (We can still continue a dialogue there, just not in real-time chat, as we can here)
Please let me know if you have any questions at all
But, the short answer to your question is that if it is a true DB plan, it has minimum funding requirements
Let me knos
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If it is a true defined benefit plan, than Schedule SB have to be completed even if single member plan, regardless of account dollar value ? Is this correct ? Thanks