Contributions to DBPP

[Gary]

This question applies to the 2006 Plan Year.

My understanding is that the minimum funding requirements must be met with cash contributions and that contributions in excess of the minimum funding can be made with property other than money.

I could not locate where I had previously found that piece of information and wanted to get other views (and specific citations) in connection with my allegation.

I have a particular client that wants to make contributions to his plan in the form of promissary notes from third parties (i.e. not the client's own corporation) that are already in existance.

Any views on that?

Thanks.

Gary

[AndyH]

Are you suggesting that a deposit in excess of the minimum would not be used for minimum funding in a subsequent year?

Are you going to burn the balance that it creates under PPA? That's about the only scenario that the question makes sense to me.

[Gary]

My general understanding was that if the minimum funding dor a plan were 100k and the maximum were say 150k for 2006 then the client would be required to contribute 100k in cash and they could contribute and deduct an additional 50k by say transferring securities into the plan.

This would result in plan assets of 150k and a credit balance of 50k going into 2007.

I'm trying to establish if the minimum funding is required in cash and if it is allowed to make contributions in excess of the minimum in property (non cash).

Once (and if) the above is established, then would it follow that a non cash contribution be able to include third party promissary notes.

Just want to determine if the above is allowed and if my understanding is correct.

Not really concerned with application related to PPA at this point.

Thanks.

[Andy the Actuary]

Been down this road before. Ixnay. See attached.

In_Kind_Contributions.pdf

[david rigby]

Speaking of "down this road before":

http://benefitslink.com/boards/index.php?showtopic=36434

http://benefitslink.com/boards/index.php?showtopic=28518

http://benefitslink.com/boards/index.php?showtopic=26763

http://benefitslink.com/boards/index.php?showtopic=19745

http://benefitslink.com/boards/index.php?showtopic=11880

[AndyH]

Impressive. That almost approaches WDIK archivist skills

[Gary]

I recall once reading in either the Pension Answer Book or the Defined Benefit Answer Book that cash must be contributed for minimum funding purposes and that property can be contributed for contributions in excess of the minimum funding obligation.

I am curious if anyone recalss which Q&A that can be found in any of the above publications.

On another note, the 5500EZ and the Schedule I Form 5500 both provide a entry for non cash contributions. The thought is that if it is on the FOrm, it would seem that it s/b allowed.

In my specific situation the client wants to contribute third parry promissary notes (so they cannot be sold on the open market) and this is probably even more aggressive and not advisable then simply transferring public securities.

I will recommend to the client not to contribute these promissary notes. Keep it simple.

Thanks.

[AndyH]

The DOL pronouncement in ATA's link clearly says that an amount over the current year's minimum funding requirement is not exempt.

A plan not subject to minimum funding doesn't have the same rules, thus the 5500 entries. Plus it's a nice place for them to play "gotcha". There are other, like non-exempt transactions.

Actually, ATA's link answers all your questions except about the books.

BTW, didn't you say this is a 2006 issue?