MPP Contribution Deposit Deadline

[Guest dlm]

Client has a money purchase pension plan with plan year ending 12/31/98. Fiscal year end is september 30th.

Client deposited $10,000 too little for 12/31/98 plan year.

Since this is MPP, the $10,000 must be deposited. But is it late? Are their excise taxes? Do we have any issues here?

Thanks for any input.

[Dave Baker]

Corporate sponsor? Has it filed its corporate income tax return for the year ended 12/31/98?

[Guest dlm]

Yes, corporate spons. and yes, 9/30/98 (fiscal year is 10/1 to 9/30)corp taxes have been filed and are NOT on extension.

[Guest FredReilly]

There are two separate issues here.

The minimum funding deadline is based upon the Plan Year, and is eight and a half months following. So you have time to make the final contribution before August 15. If it is late, it becomes subject to the excise tax under IRC 4971.

The corporate deduction is a different issue. The amount for the 1998 plan year can be used for the fiscal year beginning in or ending in the plan year, or a weighted average basis can be used. In any case, the period for deducting the amounts for the fiscal year in question has expired. Any undeducted amounts can be used in subsequent years to the extent not otherwise limited.

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[Guest dlm]

Thanks Fred.

I think what you are saying regarding the deduction (404) issue is that they can deduct the $10,000 (needed for min funding), in the fiscal year 10/1/98-9/30/99. Assuming they don't exceed 404 limits in 1999.

[Guest FredReilly]

Right. IRC 404(a)(1)(A)(i) indicates that the amount deductible is the amount necessary to meet the minimum funding standards for a given year or any prior years, subject to full funding limits. Since this is a DC plan it would seem the only limits are the 404(a)(7) combined DB/DC limit or the 404(j)(I think that is the right subsection, but might have changed) 415 limitation. I think you would have a problem with a 25% of pay plan.