What year for annual additions?

[Richard Anderson]

I am posting this question to this board because this is where the small plan experts hang out.

A one participant money purchase plan deposits the required plan year 2000 contribution of $30,000 on June 30, 2001. The plan sponsor did not extend his tax return. My understanding is that the contribution can not be counted as an annual addition for the 2000 plan year unless deposited within 30 days after the due date of the employer's 2000 tax return.

If this $30,000 has to be counted as an annual addition for 2001, must the 2001 $30,000 contribution be made late also in order to not have $60,000 in annual additions for the 2001 plan year.

Also my understanding is that there is an exception to the 30 day after the 404(a)(6) period rule if the employer makes a contribution to satisfy an accumulated funding deficiency (1.415-6(B)(7)(ii) ??).

Now if I understand this correctly (unlikely), if the contribution had been made by April 15 (30 days after the due date of the tax return) it would be an annual addition for 2000. Also if the contribution is made after September 15, 2001 (date at which it becomes an accumulated funding deficiency) it would be an annual addition for 2000.

But, if made between April 16, 2001 and September 15, 2001, the contribution will be an annual addition for 2001.

Please tell me I that I am wrong.

[Belgarath]

An interesting question. And I think that your interpretation is technically correct, under a literal reading of the regs. BUT, opinion was that this was an oversight, and the IRS agreed. According to something I read a while back, this question was actually asked at an ASPA conference a year or two ago, and the IRS agreed that the contribution you describe would count as an annual addition for the prior year.

You may want to check with an ASPA person to confirm that my memory is correct.

[Guest Doug Goelz]

Question 7 from the 2000 ASPA meeting session on IRS Q&A's pertains to this issue.

The question was pretty much the same as that posted above and pertained to the 1999 plan year.

The answer was that "1.415-6(B)(2)(v) overrides 1.415-6(B)(7)(ii) in the case of money purchase plan contributions such that the allocations would be annual additions for 1999 in either case."

The answers reflected in the session were Kevin Donovan's and Craig Hoffman's interpretation of Jim Holland's, Richard Wickersham's and Paul Shultz's.

I would bet that Kevin Donovan would be kind enough to discuss this with you if you sent him an e-mail.

[IRC401]

Have you thought about the deduction issues?

[Guest Doug Goelz]

I haven't thought much about that. Top of my head, I would think that if you just had the MP plan, you could go ahead and deduct the "late" 1999 contributions (those made in 2000 after the 1999 tax deadline) along with any 2000 plan year contributions made prior to the 2000 tax deadline.