EOY Valuation and advance contributions

[flosfur]

I have two situations with EOY valuation date. In both, there is no prior credit balance.

Situation 1:

A plan has assets of $250k @ 12/31/2004 which include advance contribution of $100k made during 2004. For S412, the interest credit on the advance contribution using the funding rate is $2,000.

So, the funding assets are: S412: 250-100-2= $148k; S404=250-100=$150k.

Normal costs under the individual Agg. method are: S412: $91,300; S404: $91,000.

EAN NC + AL @ EOY for S412 and S404 = $201k.

So the FFLs are: S412: 201-148 = $53k; S404: 201-150= $51k.

What would be the maximum deductible contribution? $53k or $51k?

----------------------------------------------------

Situation 2:

A plan has assets of $332k @ 12/31/2004 which include advance contribution of $165k made during 2004. For S412, the interest credit on the advance contribution using the funding rate is $3,000.

So, the funding assets are: S412: 332-165-3= $164k; S404=332-165=$167k.

Normal costs under the individual Agg. method are: S412: $173,000; S404: $172,500.

What would be the maximum deductible contribution? $173,000 or $172,500?

----------------------

Higher numbers feel wrong but I cannot explain to myself why except that why should making advance contribution increase the deduction?

[mwyatt]

You are of course following this to the end and subtracting from your 412 NC figures the interest credits. You might find that you end up at the 404 numbers...

[Guest penman]

The contribution necessary to meet minimum funding standards is deductible. You cannot create or increase the credit balance though.