Max Deductible = unfunded CL

[Guest lisbetf]

Hello, folks:

I have a plan that contributed over the maximum in 2002, and has a carryover contribution for 2003 of $5 million. I am now calculating the maximum deductible contribution for 2003. When I calculate the alternative maximum deductible contribution that is equal to the unfunded RPA Current Liability, do I include the entire 2002 contribution, including the $5 million dollar carryover, in the asset value at 1-1-2003?

Thanks for any help you can provide......

[david rigby]

I believe the rule is that 404 assets should exclude non-deducted contributions.

[Guest lisbetf]

True, 404 assets exclude nondeductible contributions, but the RPA Unfunded Current Liability is defined in IRC section 412, which does not exclude nondeductible contributions. That is where I get confused.

[Blinky the 3-eyed Fish]

I thought it was 404(a)(1)(D). Where in 412 is this rule described?

[Guest penman]

I referred to the outline from the 2003 EA mtg session 203 on maximum tax deductible contributions. The outline says that the actuarial asset value is to be adjusted for contributions not deducted.

[david rigby]

Refer to IRS Reg. 1.404(a)-14(d).

http://www.access.gpo.gov/nara/cfr/cfrhtml...26cfrv5_00.html

Gray Book 90-24

How is a deduction carryover treated for purposes of computing the unfunded current liability limitation under Code section 404?

RESPONSE 24

Regulation 1.404(a)-14 continues to apply. Assets should exclude contributions that have not been previously deducted.

Gray Book 2000-13

Funding: Adjustment for Undeducted Contribution in Unfunded Current Liability

A plan wants to use the maximum deductible limit under Code section 404(a)(1)(D) of 100% of the unfunded current liability. In determining the unfunded current liability, do you subtract from the assets any carryforwards under §404(a)(1)(E)?

RESPONSE

When calculating any component of the maximum deductible contribution under 404(a)(1) for a plan year, you must exclude from plan assets the amount of any employer contributions not yet deducted in prior plan years and carried forward under §404(a)(1)(E).

Copyright © 2000, Enrolled Actuaries Meeting

All rights reserved by Enrolled Actuaries Meeting. Permission is granted to print or otherwise reproduce a limited number of copies of the material on the diskette for personal, internal, classroom, or other instructional use, on the condition that the foregoing copyright notice is used so as to give reasonable notice of the copyright of the Enrolled Actuaries Meeting. This consent for free limited copying without prior consent of the Enrolled Actuaries Meeting does not extend to making copies for general distribution, for advertising or promotional purposes, for inclusion in new collective works, or for sale or resale.