Maximum Deductible CoOntribution

[emmetttrudy]

The 1/1/2009 valuation calculates a maximum deductible contribution of $100,000. This is calculated as of 1/1/2009. So if the contribution is not actually made until 1/1/2010, it gets discounted back to the valuation date, correct? So in essence, the maximum deductible contribution can be larger than the $100,000?

[Mike Preston]

It is pitiful, I know, but if you can believe it, this is one of the great unanswered questions since the law was passed nearly 4 years ago. The IRS refuses to answer the question ostensibly waiting for the 404 regs to be published, which will theoretically answer it once and for all.

If you talk, off the record, with some of the more reasonable people at the IRS, you will get a positive response (that is: the higher amount will be deductible).

The problem comes about in the first year of a plan where there is no cushion at all and the minimum as of the valuation date is also the maximum. In that circumstance a contribution not made until 1/1/2010 will be higher than the required minimum by one year's interest. Even in that circumstance we can't get the IRS to formally agree that the higher amount will be deductible. Amazing.

Until the regs are issued, I think it is a very reasonable interpretation of the statute that the higher amount is deductible. But I'm forced to tell my clients that there is a risk.

[emmetttrudy]

thank you for that informative response.

[Pension RC]

Am I correct that in 2012 this question is still unresolved (i.e. that if the minimum with interest is greater than that maximum, then the minimum with interest will be fully deductible) ?

Thanks!

[SoCalActuary]

Am I correct that in 2012 this question is still unresolved (i.e. that if the minimum with interest is greater than that maximum, then the minimum with interest will be fully deductible) ?

Thanks!

In this case, we are not getting all the govt we paid for....there are no final 404 regulations.

The minimum with interest is surely fully deductible. But the maximum does not currently include any interest adjustments, IMO.

[tymesup]

Since the minimum using MAP-21 rates is generally lower than the maximum using PPA rates, the issue is even more interesting.