Interest charge on late quarterly contributions

[Guest Marino13]

Plan year is 9/1/2001 - 8/31/2002.

Required quarterlies were $26,500 beginning 12/15/2001.

For line 9(e) on the 2001 Schedule B, when do you stop accruing the interest charge on late quarterly contributions? The employer DID NOT make the final required quarterly payment until 8/11/2003.

[david rigby]

Gray Book 93-9

Quarterly Contributions -- When Higher Interest Stops Accruing

The additional charge to the funding standard account on late quarterly contributions is to start accruing on the applicable due date. Ordinarily, the late amounts are contributed before the final contribution due date (i.e., 8-1/2 months after the end of the plan year), in which case the additional interest stops accruing when such contributions are made. However, if those contributions are not made up (which means there will be a deficiency) until after the final contribution due date, does the additional interest charge nevertheless cease at such due date or does it continue on the net amount not paid?

RESPONSE

The additional interest charge continues to apply up until 8-1/2 months after the end of the plan year. Furthermore, if contributions are not paid by that date (i.e., there is a funding deficiency), this charge increases the funding deficiency which applies as of the end of the plan year (i.e., 8-1/2 months earlier). That accumulated funding deficiency will then begin "earning" interest at the valuation rate. As a result, a double interest charge will apply during the 8-1/2 months following the end of the plan year for which the quarterly contributions were not paid.

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