Although some prohibited transactions are obvious, many occur inadvertently due to misunderstandings as to the subtleties of the law. In addition, many prohibited transactions do not actually harm the plan. This increase would be the second increase in two years. Before last year's increase, the excise tax on prohibited transactions had not increased since it was first added to the Code in 1975. The Act will allow employers to cash out a larger number of small accrued benefits of employees terminating employment.
Basis is recovered in equal installments over the recovery period.
Prior to the Act the recovery period was based solely on the age of the primary annuitant. Annuity payments that commence after Dec. 31, 1997. The Act also provides for minor additional revisions, related to pension plan rules, fringe benefit rules, and technical corrections to the Small Business Job Protection Act of 1996. A provision allowing plans to provide for increased early retirement benefits for police officers and firefighters. Additional rules governing the participation in church plans of self-employed ministers.