Deduction Timing

[CarolineK]

I'm working on a calendar year plan (2012). The employer made contributions and already filed their tax return but they didn't meet minimum funding requirements.

They have already made contributions in 2013 (to deduct for the 2013 plan year). Can I use these new contributions to satisfy the minimum funding requirement for 2012? And if so, how does that affect my maximum deductible for the 2013 plan year? OR do they need to amend their 2012 tax return?

[Andy the Actuary]

Assuming the contributions were not annotated in any way to designate that they were in behalf of the 2013 Plan Year, you may claim them for 2012 for minimum funding. The accrued contributions would be reported on the 2012 Schedule H. The interest adjusted value would be included in Plan assets for 2013 430, 436, and PBGC premium calculations. They would not be included in the 12/31/2012 assets for determining your 2013 404 maximum. The contributions would apply to fiscal year 2013 FASB.

The employer would only need to amend the 2012 tax return if they wanted to claim a deduction in 2012 for the accrued contributions.

Note the following subtlety for future reference: According to the IRS it is impermissible to deduct the accrued contribution for 2012 but to count it for 2013 minimum funding. I.e., you can't deduct contribution for a tax year prior to the plan year you claim the contribution for minimum funding.

[david rigby]

Andy is correct.

Note that IRS reg under 430 indicates the 2013 contribution must be applied to the oldest outstanding contribution requirement. By counting it as accrued at 12/31/12, you avoid an excise tax.

[CarolineK]

Thank you for the quick responses!