Schedule SB Certification/Maximum Deduction

[Doghouse]

If the employer's contribution for a tax year exceeds the maximum deductible amount, is there anything that precludes the actuary still reflecting the entire contribution on the Schedule SB? These are contributions made after the end of the plan year but before the minimum funding deadline. I'm just wondering if the actuarial certification actually speaks at all to the maximum deductible amount.

Dog

[david rigby]

There is no reference in the 5500 instructions to IRC 404. The SB is all about 412/430/436.

It's difficult to see why the actuary would include a contribution on the SB that may draw attention to something that might be interpreted as a violation of IRC 4972. Can't you just take the "excess" and treat it as part of the next year's contribution? Notice that 4972 refers to "non-deductible". It does not say "non-deducted".

[SoCalActuary]

This can get into a big discussion of capital accounts, exemption from excise tax if elected, allocation of cost between years, possible owner tax basis in the contract if it is a sole proprietor, and just the simple tax planning issue: are you turning after-tax money into pre-tax money by making a non-deductible contribution for a taxable distribution?

[tymesup]

Doesn't sound like it here, but it is possible that you have to reflect a contribution that exceeds the maximum deductible amount. Suppose a sole proprietor has no Schedule C income, so there is no deductible contribution. If there is a minimum required contribution, you would reflect that on the SB to prevent a funding deficiency.

[Draper55]

i received a similar question today...can a contribution

which is made to satisfy the minimum funding be split

for deduction purposes between the prior year(e.g., 2011)

and the current year(e.g. 2012). I am thinking you can always deduct a contribution made

in the first nine months which is used to satisfy minimum funding and the

choice of years for 404 is a different issue. the more posts i read on these

kind of questions the less clear things become...

[Guest Jeff Hartmann]

If the employer's contribution for a tax year exceeds the maximum deductible amount, is there anything that precludes the actuary still reflecting the entire contribution on the Schedule SB? These are contributions made after the end of the plan year but before the minimum funding deadline. I'm just wondering if the actuarial certification actually speaks at all to the maximum deductible amount.

Dog

On our contribution reporting form, we ask for "Amount of Deduction on company tax return", to confirm the company's intent to deduct amounts (if any) that exceed what we consider the maximum deductible amount to be. If there is a big excess amount, above the maximum deductible, we may first suggest amending their tax return, to reduce their deduction down to the maximum deductible.

In most circumstances, my Schedule SB will reflect all contributions taken as a deduction for that tax year/plan year ....... even if there is a small amount at risk of being determined above what we told them the maximum deductible amount was. If this was not done, then the "Asset" to be used in the following year's valuation would have to be different for a 404 deductible limit calculation vs. a 412 minimum funding calculation.

I don't consider Schedule SB to be a confirmation that the contribution does not exceed the deductible limit, and I don't expect that listing any contribution on Schedule SB would serve to "draw attention" to an excess contribution i.e. looking just at Schedule SB does not enable anyone to draw conclusions that a contribution exceeds the maximum deductible amount (a number that does not appear on Sch SB).