Deduction and timing

[John Feldt ERPA CPC QPA]

Suppose a calender year corporation wants to establish a DB plan that has a June 30 plan year end.

They want a short first year to run 1-1-2008 to 6-30-2008. Thereafter, the plan year starts July 1. Beginning of year valuation.

Since their fiscal year is calendar year, can they deduct the January 1, 2008 (half-year prorated) funding requirements AND their July 1, 2008 funding requirement on their 2008 tax return? (let's assume all contributions are made during 2008 to cover the funding requirements)

[SoCalActuary]

So you need to establish an accounting procedure that the plan sponsor will deduct the cost of plans that begin in the fiscal year of the employer. This needs to be consistently applied, or request a change in accounting method in the future.