Carryover contributions and PPA

[Guest RBlaine]

SE had 60k earned income for 2007.

Min contribution for 2007 was $100k resulting in $40k undeducted contribution.

In the past i would have reduced the 404 assets by the $40k to calculate the max NC (Ind Agg), but the 412 assets would not have been reduced. Similar for the FFL.

I thought I would reduce the assets by the $40k when determining the max for the 01/01/2008 valuation, but the max contribution refers to 430(g).

What am I overlooking?

[iRC §404(o)] `(2) DETERMINATION OF AMOUNT-

[iRC §404(o)(2)] `(A) IN GENERAL- The amount determined under this paragraph for any plan year shall be equal to the excess (if any) of--

`(i) the sum of--

`(I) the funding target for the plan year,

`(II) the target normal cost for the plan year, and

`(III) the cushion amount for the plan year, over

`(ii) the value (determined under section 430(g)(2)) of the assets of the plan which are held by the plan as of the valuation date for the plan year.

[iRC §430] `(g) Valuation of Plan Assets and Liabilities-

[iRC §430(g)] `(1) TIMING OF DETERMINATIONS- Except as otherwise provided under this subsection, all determinations under this section for a plan year shall be made as of the valuation date of the plan for such plan year.

[iRC §430(g)] `(2) VALUATION DATE- For purposes of this section--

`(A) IN GENERAL- Except as provided in subparagraph (B), the valuation date of a plan for any plan year shall be the first day of the plan year.

`(B) EXCEPTION FOR SMALL PLANS- If, on each day during the preceding plan year, a plan had 100 or fewer participants, the plan may designate any day during the plan year as its valuation date for such plan year and succeeding plan years. For purposes of this subparagraph, all defined benefit plans (other than multiemployer plans) maintained by the same employer (or any member of such employer's controlled group) shall be treated as 1 plan, but only participants with respect to such employer or member shall be taken into account.

`© APPLICATION OF CERTAIN RULES IN DETERMINATION OF PLAN SIZE- For purposes of this paragraph--

`(i) PLANS NOT IN EXISTENCE IN PRECEDING YEAR- In the case of the first plan year of any plan, subparagraph (B) shall apply to such plan by taking into account the number of participants that the plan is reasonably expected to have on days during such first plan year.

`(ii) PREDECESSORS- Any reference in subparagraph (B) to an employer shall include a reference to any predecessor of such employer.

[iRC §430(g)] `(3) DETERMINATION OF VALUE OF PLAN ASSETS- For purposes of this section--

`(A) IN GENERAL- Except as provided in subparagraph (B), the value of plan assets shall be the fair market value of the assets.

`(B) AVERAGING ALLOWED- A plan may determine the value of plan assets on the basis of the averaging of fair market values, but only if such method--

`(i) is permitted under regulations prescribed by the Secretary,

`(ii) does not provide for averaging of such values over more than the period beginning on the last day of the 25th month preceding the month in which the valuation date occurs and ending on the valuation date (or a similar period in the case of a valuation date which is not the 1st day of a month), and

`(iii) does not result in a determination of the value of plan assets which, at any time, is lower than 90 percent or greater than 110 percent of the fair market value of such assets at such time.

Any such averaging shall be adjusted for contributions and distributions (as provided by the Secretary). [JCX-38-06 explanation]