excess contribution (DB)

[k man]

a client of mine made a contribution well in excess of the allowable contribution for the current plan year. it looks to me that in order to use mistake of fact the contribution can not be in excess of 25,000. here the contribution was greater. as we are still in the same plan year it looks to me like you can return the money to the employer but only after obtaining a nondeductibility ruling. is this correct?

[Belgarath]

That's what Rev. Proc. 90-49 appears to say. However, it also appears to condition the ability to apply for a return as being contingent upon the contribution being made to satisfy the quarterly contribution requirements...

REV-PROC, PEN-RUL 17,299L-82, Rev. Proc. 90-49, 1990-2 CB 620, September 24, 1990. [Modified by Rev. Proc. 93-23 at ¶17,299M-62 and by Rev. Proc. 94-8 at ¶17,299M-90.]

".02 This revenue procedure applies to employer contributions to a qualified defined benefit pension plan that are made to satisfy the quarterly contributions requirement of section 412(m)

of the Code for the plan years beginning after December 31, 1989 (see section 5)."

Now, you'd have to get some input from an actuary on this, because I'm not really sure just how that applies in real life administration. I think a lot of plans have sufficient assets so that a quarterly contribution isn't necessarily required? And if the contribution wasn't made for this purpose, then I'm frankly not sure what your alternatives are - whether you can still apply for return of the contribution, or if you are stuck just leaving it there. Yo, actuaries, what think ye?

[rcline46]

Did you check against the maximum 404 contribution? Remember that limit is up to (old) current liability, and use the low end of the range.

[k man]

that qtrly contribution throws me. i am not sure what they mean. dpes anyone know how this works in practice? do you have to pay an excise tax if you apply for the ruling? there is no way they will give me a ruling before the end of the plan year?

[david rigby]

Did you check plan provisions, about making contributions only if deductible?