Fully insured plans 412(i)

[Guest picwrc]

I have heard from some that 412(i) plans must be funded on the first day of the plan year. I have heard they must be funded before the end of the plan year. I have heard they must be funded by the due date of the corporate tax return. Just curious if anyone has any idea which is correct and why.

[Belgarath]

412(i) plans are a different breed than "normal" defined benefit plans. They are not subject to the 8-1/2 month minimum funding deadline that applies to regular pension plans. So the required dates for funding will be dependent upon the plan document, as well as the premium deadlines for the underlying annuity and insurance investments.

[Guest merlin]

Further to Belgarath's answer see 412(i)(4).

[Guest picwrc]

Thanks for the input. I am aware that a 412(i) is not subject to minimum funding. I checked our plan document and all it says is "All contracts will provide for level annual premium payments to be paid for the period commencing with the date that each individual became a participant in the plan (or in the case of an increase in benefits, commencing at the time such increase becomes effective and extending to NRA for each such individual)." My question is, can a contribution actually be made "for the period commencing with the date that each individual became a participant in the plan" after the end of the plan year? Or does the contribution have to be deposited before the end of the plan year, or even on the first day of the plan year? Any opinion would help.

[Guest merlin]

In the normal run of events with a regular ttee'd plan the client makes the contribution according to his own schedule, depending on cash flow, due date of return, minimum funding date, etc. But 412i plans aren't normal. They are funded with insurance/annuity products. The client will be billed by the insurance co. for the premium, and that bill will have to be paid within the insurer's time frame, not the client's, else the policies will lapse. Hence the reference to 412i4. How much flexibility will the carrier allow? I don't know, but my guess is not much. It's their money, your client has it, and they want it back.

[Belgarath]

The contribution can be paid after the end of the plan year. As far as insurer flexibility, Merlin is correct - this is up to the individual company. Note, however, 1.412(i)-1(b)(2)(v), which allows additional time over and above the normal lapse period, assuming the insurance carrier will also allow it. We've done administration for at least one insurance carrier that allows this extra time, but they may be more flexible than most.

The "lapse date" and hence the time allowed under the above referenced section could also depend upon whether the plan is BOY or EOY, and the anniversary date of the insurance policy(ies).