2007-28 Q&A 9 Reversed

[ak2ary]

Treasury has announced they will not enforce QA 9 of 2007-28 and rather will follow proposed tech correction

Attached is an email ASPPA is sending to members

ASPPA Members:

Treasury officials informed Congress yesterday that they will enforce the new PPA combined plan deduction limits under Internal Revenue Code §404(a)(7) in accordance with the language in the proposed PPA technical corrections legislation (H.R. 3361/S. 1974). Thus, Q&A 9 of Notice 2007-28 will not be enforced and, in a defined benefit/defined contribution plan combination situation, if the DC contribution was not greater than 6%, Code §404(a)(7) does not apply to the defined benefit plan.

This is effective for the 2006 plan year and has two primary IMMEDIATE effects:

· Employers who contributed in excess of 25% of compensation to their defined benefit plan (and in excess of Unfunded Current Liability) in 2006 based on an interpretation in conflict with Q&A 9 of Notice 2007-28 need not pay an excise tax; and

· Employers who move fast for 2006 (who were previously limited by Notice 2007-28), have until tomorrow to increase their 2006 deductible contribution.

Link to Sept. 13 Treasury Letter (http://www.asppa.org/government/gov_reg.htm)

ASPPA was instrumental in securing inclusion of this solution in the PPA technical corrections legislation. We also addressed this issue with the Treasury and IRS in a May 14, 2007 comment letter (http://www.asppa.org/pdf_files/0514_2007-27NoticeFIN.pdf).

[tymesup]

Nice of them to come out with this on Friday afternoon. I guess a class action suit is out of the question.

[John Feldt ERPA CPC QPA]

Tom, nice job on your letter in May, especially pointing out the conversation Grassley and Baucus had about this.

[JAY21]

So we can contribute and deduct up to 150% of UCL under the DB plan plus 6% of DC considered comp under the DC plan ? Is that correct ?

[ak2ary]

So we can contribute and deduct up to 150% of UCL under the DB plan plus 6% of DC considered comp under the DC plan ? Is that correct ?

That is correct

[Brenda Wren]

Hmmm...is Monday, the 17th too late? What's up with Saturday?

[JAY21]

The ASPPA e-mail states for those that move fast and fund by tomorrow (9/15) they can increase their contributions. If a sponsor is a partnership/LLC/Sole Prop on extension to 10/15, and will at least meet their minimum required contribution by 9/15, presumably they have another month to add an add'l deductible contribution to take advantage of this change, right ? (e.g., final contribution equal to 150% of UCL plus 6% of DC Comp)

Corporations would not have the extra month since their extended due date is 9/15. Anyone agree or disagree ?

[Mike Preston]

I think corporations get until Monday for a deposit to be counted if it is deductible based on the maximum deductible rules. The IRS is fond of saying a weekend/holiday deadline is not extended for minimum funding purposes. But you haven't seen a suit on this issue, have you? I thought not.