BoA Announces IRS Finding of Illegal 401(k) Plan Asset Transfers

March 16, 2006 ( - Bank of America Corp. ran afoul of US tax laws in 1998 and 1999 by permitting workers to move assets from the company's 401(k) plan to its defined benefit pension plan.

Even though the Charlotte, North Carolina-based bank didn’t reveal that ruling by the Internal Revenue Service (IRS) until this week, the bank said in a regulatory filing with the US Securities and Exchange Commission (SEC) that it was notified of the decision in December 2005, according to a Reuters news report. Bank of America said the IRS discovered the violation as part of its audit of the 1998 and 1999 tax returns for the company’s 401(k) plan and pension plan.

Tax officials held that amendments it made in 1998 to the 401(k) plan to permit the voluntary transfers violated an “anti-cutback” rule in the Internal Revenue Code.

The “anti-cutback” rule is designed to protect plan participants’ accrued benefits, early retirement benefits and retirement-type subsidies. Section 411(d)(6) of the tax code, which the IRS said Bank of America violated, provides that an amendment to a plan may not reduce participants’ accrued benefits, according to the news report.

Bank of America said it is continuing to participate in administrative proceedings with the IRS.