Contributions Included on Form 5500

[ac]

We prepare the Form 5500 for a DB plan that deposits their contribution on October 14th each year.

The minimum required contribution for the plan year is $0 so we do not have an issue for the contribution being deposited after September 15th. My question is should this contribution be included on the Form 5500-EZ? We do not list the contribution on the Schedule SB until the following year.

The Plan Sponsor will make a deposit on October 14, 2011 of $100k and deduct the contribution for 2010. Should we include the contribution on the 2010 Form 5500-EZ?

[AndyH]

On what basis would it be deductible for 2010?

(It was not paid within the year. If the plan and employer tax year are the same, was it paid within the period ending with extended due date for the employer's tax return?)

Looks like a 2011 deduction and contribution for 5500 purposes to me.

[Andy the Actuary]

Also, the IRS has taken the position that a db contribution cannot be deducted in a year that precedes the year the contribution is claimed on Schedule SB.

[ac]

The extended tax filing deadline for the plan sponsor for the 2010 tax year is 10/15/2011. It is my understanding that any contribution deposited prior to the extended tax-filing deadline may be deducted for the prior year.

From a minimum funding standpoint, we can not recognize the contribution for the 2010 plan year since it was deposted after September 15th. I am not aware of any preclusion that would prohibit the plan sponsor from deducting the contribution for 2010.

[AndyH]

Is the sponsor a non-profit? What is it's fiscal year end?

[Bird]

The extended tax filing deadline for the plan sponsor for the 2010 tax year is 10/15/2011. It is my understanding that any contribution deposited prior to the extended tax-filing deadline may be deducted for the prior year.

From a minimum funding standpoint, we can not recognize the contribution for the 2010 plan year since it was deposted after September 15th. I am not aware of any preclusion that would prohibit the plan sponsor from deducting the contribution for 2010.

That's my understanding too. This could be for a sole proprietor or LLC taxed on a Schedule C.

to answer the question, I believe you could do it either way. Either file on a strict cash basis and not include accrued contributions, or include the accruals. I always include the accruals as I think that ties out better with other reports and the business return.

Also, the IRS has taken the position that a db contribution cannot be deducted in a year that precedes the year the contribution is claimed on Schedule SB.

I wasn't aware of that, is that something that was said publicly?

[ac]

The plan sponsor is an LLC taxed as a sole prop.

If I include the contribution on the 5500-EZ, then the contributions listed on the Sched SB will not match the 5500-EZ and the market value of assets will be different on next year's Sched SB.

[Andy the Actuary]

Also, the IRS has taken the position that a db contribution cannot be deducted in a year that precedes the year the contribution is claimed on Schedule SB.

I wasn't aware of that, is that something that was said publicly?

I'm out of town so can't provide much documentation but my recollection is this was discussed in an EA Meeting Graybook question in 2010.

[Bird]

If I include the contribution on the 5500-EZ, then the contributions listed on the Sched SB will not match the 5500-EZ and the market value of assets will be different on next year's Sched SB.

Right. I have that same situation. Of course the SB doesn't go anywhere but the file so it's not like it's a flag anyway.