contribution in employer stock

[Scuba 401]

as long as it is less than 10%, can an employer contribute and deduct the FMV of a contribution of employer stock to a defined benefit plan?

[rcline46]

Read the Keystone decision.

That 10% number you have in your head is INVESTMENT in corporate stock, which is much different than CONTRIBUTION in corporate stock.

[KJohnson]

I thought that while Keystone generally said that in-kind contributions to a DB are a PT but there is still an exception for employer securities provided the limitations of ERISA §408(e) are satisfied-- IRC §4975(d)(13)

Look at Sal, Chapter 7 - Taxation Rules, Section XVI, Part N,

[rcline46]

KJohnson, that is true, but one has to work to meet the exception. No commissions, fair value on date of contribution (which means no closely held stock), not in excess of required contribution, and a few other rules.

It is similar to investing in Real Estate - can you say ERISA ATTORNEY? Will it be worth the additional cost to make sure it is done right? Is it a prudent investment at the time made?

[jpod]

408(e) doesn't apply to a db plan.

[Scuba 401]

408(e) doesn't apply to a db plan.

/

so can they do it or not? what is the general consensus?

[Scuba 401]

jpod--it applies:

(e) Acquisition or sale by plan of qualifying employer securities; acquisition, sale, or lease by plan of qualifying employer real property

Sections 1106 and 1107 of this title shall not apply to the acquisition or sale by a plan of qualifying employer securities (as defined in section 1107 (d)(5) of this title) or acquisition, sale or lease by a plan of qualifying employer real property (as defined in section 1107 (d)(4) of this title)—

(1) if such acquisition, sale, or lease is for adequate consideration (or in the case of a marketable obligation, at a price not less favorable to the plan than the price determined under section 1107 (e)(1) of this title),

(2) if no commission is charged with respect thereto, and

(3) if—

(A) the plan is an eligible individual account plan (as defined in section 1107 (d)(3) of this title), or

(B) in the case of an acquisition or lease of qualifying employer real property by a plan which is not an eligible individual account plan, or of an acquisition of qualifying employer securities by such a plan, the lease or acquisition is not prohibited by section 1107 (a) of this title

i think you are agreeing with me that the exception applies. is that correct?

[KJohnson]

I think you can do it but all of the points in rcline46's second post are well taken.