Underfunded PBGC covered terminated defined benefit plan funding deadline

[YankeeFan]

A PBGC covered defined benefit plan was terminated effective December 31, 2012. The plan has already been submitted to both the PBGC and IRS. The PBGC 60 day review period has expired but we may wait for IRS approval before assets are distributed.

The plan is underfunded and the 2 majority owners intend to forgo receipt of a portion of their benefits to the extend necessary to make plan assets sufficient. The plan sponsor intends to contribute at least the minimum required contribution to the plan prior to the September 15, 2013 funding deadline. The contributions made prior to September 15, 2013 will be deducted on the 2012 corporate tax return.

Can the plan sponsor make additional contributions to the plan after September 15, 2013 and deduct these amounts on the 2013 corporate tax return? I'm uncertain since the plan terminated effective December 31, 2012 and there is no valuation required for the 2013 plan year.

[ScottR]

When is the corporate tax filing deadline for 2012? 10/15/13? If so, Code Section 404(o)(5) will probably allow the deduction of all employer contributions made thru that date.

You might also take a look at Code Section 404(g) to see if that helps. Under that section, contributions are deductible in the year made, but only to the extent that they don't push assets higher than PBGC guaranteed benefits.

... Scott

[YankeeFan]

The corporation is a December 31st fiscal year end and the corporate returns are due September 15, 2013 (with extension).

So the question remains, can contributions be made after September 15, 2013 and deducted on the 2013 corporate returns?

[Effen]

I would argue this is an accounting question and not in the actuaries area of expertise. You should refer the client to discuss this with his/her accountant unless you are willing to take the repercussions if you are wrong and the deduction is disallowed.

That said, I think it would be deductible, but different accountants have different opinions about how, and over how many years.

[Andy the Actuary]

Effen, are you suggesting that if you are talking to two accountants, you will get three opinions?

[Effen]

Definitely! Too bad they aren't like us actuaries who speak as one voice on all topics.