Form for Small Employer Pension Plan Startup Cost Tax Credit Revised

By ASPPA Net Staff • September 25, 2017 • 0 Comments
The IRS has revised Form 8881, Credit for Small Employer Pension Plan Startup Costs. The revision is effective in December 2017.

Eligible small employers use this form to claim the credit for qualified startup costs incurred in establishing or administering an eligible employer plan. For such employers, the credit is 50% of the qualified startup costs paid or incurred during the tax year. The credit is limited to $500 per year for the first credit year and each of the following two tax years. No credit is allowed for any other tax year.

Eligible small employers include those that have had no more than 100 employees during the tax year preceding the first credit year who received at least $5,000 of compensation from that employer during that tax year.

Small employers that during the three tax years preceding the first credit year established or maintained a qualified employer plan with respect to which contributions were made, or benefits were accrued, for substantially the same employees as are in the new qualified employer plan are not eligible employers.

Qualified startup costs are expenses paid or incurred in connection with:

  • establishing or administering an eligible employer plan; or

  • the retirement-related education of employees about the plan.

An eligible employer plan is a qualified employer plan with at least one employee eligible to participate who is not a highly compensated employee. All eligible employer plans of the same employer are treated as one eligible employer plan.




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