Overlap and plan year and fiscal year

[Guest saeissler]

Let us say the first plan year is 12-31-04 to 12-31-05 and the fiscal year of the employer is 1-1-04 to 12-31-04. The beginning of the year minimum required contribution is $75,000 and the end of year contribution with 6% interest is $79,500. Is the deduction for the 2004 fiscal year the full $79,500 or just the $75,000 with interest to the end of the fiscal year - which is zero. I think it would be the full $79,500 but have come across some valuations deducting $75,000 in 2004 and the rest of the minimum required contribution in 2005. It looks to me like the timing rules of 1.404(a)(14)(f)(3) just apply to maximum deductions higher than the minimum funding requirement.

[Blinky the 3-eyed Fish]

You are correct that it's only the maximum deductible contribution that gets interest to the earlier of the end of the fiscal year in which the deduction is taken or the end of the plan year. The minimum is always considered as of the end of the plan year.

[Guest saeissler]

Just to clarify - you agree that the deductible contribution is $79,500?

[Blinky the 3-eyed Fish]

Si, senor!

[Guest saeissler]

Thanks Blinky!

[mbozek]

Could you please tell me how you can have a plan yr that is longer than 12 months? 12/31/04 to 12/31/05 is 12 months and 1 day.

[Guest saeissler]

Good catch! I meant that the plan year is 12-31-04 to 12-30-05. I posted this question on PIX as well and got a "$75,000" response with no explanation.

[Guest saeissler]

HOwever the DB Answer Book refers to a 1992 Enrolled Actuaries Meeting Gray Book Q & A 33 which says the the 404(a)(1)(A)(i) section is the minimum required contribution at the end of the plan year offset by contributions with interest to the end of the plan year.

[Blinky the 3-eyed Fish]

Yes, that Q&A answer is my understanding as well. If you contributed before the end of the plan year, the interest credits on the contribution would count towards the minimum.