Newbie Question

[Leopurrd]

Hello all,

I've found this board to be very helpful in the past, so I'm hoping to try my luck again today.

I'm relatively new to DB plans. I was asked to do some research regarding a small overpayment in a calendar year one participant DB for 2004 (approximately $500.00). The funding was made based on estimates from the actuary, but turned up lower than the expected at year end with actual information.

I've read prior posts and came across one that referenced the full funding limitation and irc 4973 (if I remember correctly). From what I've read, IRC 4973 states an exception to the DB funding where the employer can elect not to include contributions except above the calculated full funding limitation.

Would anyone be so kind as to help me with the following:

1. How to calculate the full funding limitation (hope this isnt asking too much)

2. Explanation of the exception/is my understanding correct?

3. How would this affect the corporate return for the client - I'm assuming if the contribution is limited to above the full funding that is all they can expense on their return?

Thanks in advance,

Vicki

[No Name]

I may be getting old, but seem to recall something about a de-minimus $25,000. Don't recall what it referred to, but may be worth a search.

[Blinky the 3-eyed Fish]

Help me understand the question. Did the actuary perform a projected valuation and then a final valuation and that is why the funding differed?

The rule to eliminate excise tax that you are thinking of is 4972©(7). It doesn't apply here unless you are worried about the deduction under 404(a)(7). If they made the deposit during the year and it is greater than the maximum deductible contribution, there is a 10% excise tax.

As for the corporate return, they are limited to contributing and deducting the maximum deductible contribution. It really sounds like you and the actuary need a pow wow.

[Leopurrd]

No Name and Blinky,

Thank you very much for your responses. It cleared up the questions. I read more info over the weekend and realized that I was clearly misunderstanding the situation (as I said, I'm not very familiar with DB plans!).

Blinky, FYI, you are correct in your thinking.

Thanks again!

Vicki