short plan year quarterly required contribution dates

[Tom Poje]

How are the 412m quarterly contribution dates for a short plan year determined?

[david rigby]

I could find nothing in Rev. Ruling 95-31 that directly addresses this. The only Q&A in the GrayBook is 1993-3:

Q

With respect to a short plan year, how are quarterly contributions based on 100% of the prior year's minimum determined and when are the amounts due?

RESPONSE

Until guidance is provided, any reasonable method can be used.

[Mike Preston]

So, Tom, what do you want them to be? (I've always wanted to say that.)

[John A]

Related question:

How are the 412m quarterly contribution dates for a plan year that starts and ends in the middle of a month (such as January 17, 2002 to January 16, 2003) determined?

[david rigby]

I cannot locate anything directly addressing the question of a plan year the begins other than the first day of a month.

However, Q&A-1 from Notice 89-52 states "...quarterly installments are due 15 days after the end of each quarter." It does not refer to "calendar quarter". In addition, the first paragraph of the "Background" section of Notice 95-31 includes "...quarterly contributions are made not later than 15 days after the end of each quarter of the plan year."

My hunch would be to use a literal read of the language. For example, I have a plan that begins on March 31. I think the first quarterly contribution due date is July 14.

[AndyH]

Has anything changed on this? I have a plan that was calendar that changed to 3/31, so there is a short plan year 1/1-3/31. If not for the change, quarterlies would apply and the first would be due 4/15.

Quarteries were not paid. The entire amount will be funded 12/15. Is quarterly interest due, or might it be a reasonable interpretation that no quarterlies are due for three month period because it ended prior to the first due date?

[david rigby]

Gray Book, 2004-9

Funding: Minimum Funding Contribution Due Dates

Plan A’s plan year is December 20 through December 19. The four plan-year quarters end on March 19, June 19, September 19, and December 19.

a) IRC 412(m)(3)(B) requires quarterly contributions for calendar year plans to be deposited by April 15, July 15, October 15, and January 15 of the following year. Further, IRC 412(m)(6)(A) states that for fiscal year plans, the month in the aforementioned due dates would be substituted with the corresponding month of the fiscal year. This would suggest the due date is always the 15th of a month, and only the month due changes. As such, for this plan, the quarterly contributions would be due March 15, June 15, September 15, and December 15 -- four days before the end of each quarter.

However, Q&A-1 of Notice 89-52 states that quarterly installments are due 15 days after the end of each quarter. Under this guidance, this plan's quarterly contributions would be due April 2, July 3, October 3, and January 2 of the following year.

What are the correct quarterly contribution due dates for Plan A?

b) What is the last day that a contribution may be made to Plan A and count for the prior plan year under IRC 412©(10)?

RESPONSE

a) Notice 89-52 is the IRS's interpretation of the requirements of IRC 412(m)(3)(B) and 412(m)(6)(A). Therefore, the quarterly contributions are due April 2, July 3, October 3, and January 2.

b) September 3, 2004, which is the "day which is 8-1/2 months after the close of the plan year."

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[mwyatt]

Hey Pax:

Not sure that this actually answers Andy's question. Seems that all the GB answer is referencing is non first day of month plan year due dates, not the practicalities of a short year's impact on quarterlies.

Sorry Pax - this 2 year old thread, after rereading, was asking two separate questions. One, the short year conundrum (as addressed by Andy), and the non-first day of the year question (which you accurately cited). Any ideas on the short year issue?

[david rigby]

Still no guidance of which I am aware to deal with short plan years. However, it has been submitted for possible inclusion in the 2005 GrayBook.

[SoCalActuary]

My recollection is that Rick Block researched this question shortly after the law became effective. If you can reach him, he gave a reasonable explanation at the time.

Among the issues he addressed were:

What is the prior year cost ( I recall his answer as "It's irrelevant")

When are the payments due? (3 1/2 mo. after begin yr, then 3 months thereafter until you run out of plan year)

What is the quarterly payment? (Annualized current year cost, computed at beginning of year, times 25%)

For a more authoritative position, write to IRS.

[david rigby]

In my mind, that solution would be satisfactory under the IRS's comment in 1993.

[AndyH]

SoCal,

When are the payments due? (3 1/2 mo. after begin yr, then 3 months thereafter until you run out of plan year)

How might that work if the short year ends before the first quarterly would be due? Does that mean no quarterly in such case?

[SoCalActuary]

The quarterly contribution would be late if the first payment was not made by 3.5 months after the start of the year. The amount would be the beginning of year cost for the short year of 3 months or less.

Now additional contributions could be made up to 8.5 months after year end for minimum funding. Failure to make the first payment simply means quarterly penalty and notice requirements.

I will also repeat my recommendation that you contact Rick Block to see if his old outline is available.