Getting a tax ID for your cash balance plan

Why the plan needs its own number

Your business and the plan's trust are separate entities for tax purposes, so each has its own EIN. The business keeps using its own number for payroll, its tax return, and as the employer on the plan's Form 5500-EZ. The trust's number is used for the plan's own account.

The practical reason you need it early is the brokerage. When you open the plan's account, the firm asks for the plan's tax ID, not the business's.

What to have ready

Apply once your plan documents are prepared, because the application asks for details that come from them:

• the exact legal name of the plan or trust, as it appears in the plan document
• the plan's effective date
• the name of the trustee, usually you
• your own Social Security number or ITIN, because you are the responsible party
• a US address for the plan, usually the business address

Applying online

The IRS online application is the quickest route and issues the number at the end of the session. It is open only to applicants with a US address. The IRS changes its screens from time to time, so the labels below may differ slightly:

1. On IRS.gov, go to "Apply for an EIN online" and begin the application.
2. For the type of entity, choose to view additional types, then the option for an employer plan. The screen gives 401(k) and money purchase plans as examples; if you are unsure it fits your plan, check with your plan provider before you submit.
3. Enter your details and say that you are the owner, trustee or plan administrator of the plan.
4. Enter the address where the plan is located.
5. Enter the plan's exact legal name and its start date.
6. When asked whether the plan is liable for non-payroll income tax withholding, the usual answer before any money is paid out is no.
7. Choose to receive the confirmation letter online, and download it before you close the page.

The confirmation letter, the IRS's CP 575 notice, is the proof of the number that the brokerage will ask for. Keep it with the plan's records.

If you cannot use the online application, Form SS-4 can be faxed, which takes about four business days, or mailed, which takes about four weeks. On the form, the entries that matter for a plan trust are:

One EIN per person per day

The IRS issues one EIN per responsible party per day, whichever way you apply. That is easy to trip over when you set up more than one thing at once.

• If you are opening a Solo 401(k) and a cash balance plan together, each plan's trust needs its own EIN, so you need two applications on two different days. See using a cash balance plan with a Solo 401(k).
• If your business does not have an EIN of its own yet, that is another application, on another day.

Near a deadline, a day can matter, because the brokerage account has to be open before money can go in. Plan the applications so each one lands on its own day, well before you need to contribute. The deadlines calculator shows when contributions are due.

What the brokerage needs

Firms differ, and some still use paper applications that must be signed in ink. Most ask for the same things:

• the plan's name, as in the plan document
• the plan's EIN and the business's name and EIN
• the plan type, which for a cash balance plan is defined benefit
• the date the plan was established
• the trustee's details and identification
• the IRS letter confirming the plan's EIN
• the signed plan document, or the pages showing the trust's name, the trustees and their signatures

The account is often a trustee-directed account for the whole plan rather than separate accounts for each person. Once it is open, you choose the investments; see investing cash balance plan assets.

The full order of steps, from choosing a provider to the first contribution, is in how to set up a cash balance plan.

Keeping it up to date

If the responsible party changes, for example because someone else becomes trustee, the IRS expects to be told on Form 8822-B within 60 days.