Excise Tax Guidance for Untimely Payment of Deferrals

June 30, 2006 – The IRS has issued Revenue Ruling (Rev. Rul.) 2006-38, which is intended to assist in computing the amount at issue in a prohibited transaction (i.e., the fair market value) resulting from failure to timely remit deferrals to an IRC Sec. 401(k) plan. The amount thus determined is subject to a 15 percent excise tax under IRC Sec. 4975(a). If not corrected during the taxable period, this amount is subject to a 100 percent excise tax under IRC Sec. 4975(b). 

Rev. Rul. 2006-38 may be accessed as follows.