return of contribution

[Gary]

A client made a contribution in excess of deduction limit by more than 25,000.

The plan provides for the refund of an employer contribution, but it does not explicitly say that a contribution is conditioned to it being deductible.

In order to get a return of such contribution the IRS request requires that the plan provides for a return of contribution and either in the plan or by means of a resolution a statement stating that plan contributions are conditioned on their deductibility.

If plan sponsor creates a resolution today can it make an IRS request for return of a prior contribution? That is, the contribution maed prior to the resolution.

Contribution was made less than a year ago as the plan requires such refund within the year. Of course by the time they hear from IRS it would have been longer than a year.

Any thoughts?

Thanks.

[Calavera]

How about:

1. Do not refund

2. Do not deduct

3. Count total contributions for minimum purposes

4. Carry over and deduct non-deductible portion next tax year

5. There are no excise taxes on DB contribution over max - http://benefitslink.com/boards/index.php?s...ic=47600&hl

[david rigby]

Rethink whether the calculation of deductible limit is subject to modification?

[Guest Quagmire]

If plan sponsor creates a resolution today can it make an IRS request for return of a prior contribution? That is, the contribution maed prior to the resolution.

One never knows what the IRS will allow, but given their new-found hard line approach a board resolution signed after the contribution was made will not work.

[Gary]

So in response to Calavera's comment number 5:

Contributions in excess of the deduction limit, while not able to be deducted in that year, are not subject to the 10% excise tax if the plan sponsor makes an election as specified in 4972©(7).

So if the sponsor contributes 120,000 and the deduction limit is 100,000 for 2010 than they can deduct 100,000 and the remaining 20,000 can be deducted in a later year and not be subject to 10% excise tax?

Why would anyone not make this election?

Is that how it works?

Thanks.

[Belgarath]

How is the "election" made? Just a board resolution, or written statement if entity isn't corporate? And since I'm not a DB person, does this have any effect on how the 5500 or the SB is completed? This almost seems too easy, which makes me nervous! But I did read the conference commitee reports, and it seems clear that the intent was to make it easier to have DB plans adequately funded, so maybe it really is this easy!