DB Contribution to be made on 3/16/2016 after tax return is filed

[CharlesLeggette]

CPA called with a creative question....can the taxpayer contribute his 2015 MRC on 3/16/2016, 1 day after filing his 2015 return and still meet the MRC requirement for 2015 but push the deduction into 2016, if so what happens to his 2016 pension deduction which he expects to be large.

[Calavera]

The 2015 MRC could be made anytime before earlier of 9/15/2016 (assuming calendar plan year) or the 2015 Form 5500 filing. The challenge would be to have enough 2016 earnings to deduct the 2015 and 2016 MRCs in 2016. The 2015 MRC contribution should be deducted first up to extent allowed by the 2016 earnings. If there will be not enough room to deduct both MRCs in 2016, the remaining will be carried over to the 2017 tax year.

[My 2 cents]

The deduction limitation is based on the maximum amount for a particular plan year. The employer will have already committed to what plan year applies to what fiscal year, and has to live with that. The maximum deductible amount for most defined benefit plans is significantly larger than amounts required as MRCs, so there could well be plenty of room in the 2016 tax year's limit to cover two years' worth of minimum contributions. Not always, but in many instances.

Certainly, if the plan year is a calendar year, an amount contributed on March 16, 2016 can be applied to the 2015 plan year minimum.