Terminated DB

[Dougsbpc]

We administer an 18 participant DB plan covered by PBGC. We are going through a standard termination and the company will fund any difference between assets and liabilities. Participants will likely be paid benefits in late March 2018. Exactly at that time a contribution will be funded.

Given the plan termination, are there any restrictions on what year the deduction for the contribution can be taken? Must it be 2018 or could it be 2017 (assuming they went on extension)

Thanks.

[Effen]

Either year is acceptable.  

[Buffys Redrum]

Is the accounting cash or accrual?  An accrual basis allows either '17 or '18.  Cash basis may require 2018 (the year of deposit).  The accountant may have the final say.

[Mike Preston]

There is no such thing as "cash" accounting for purposes of dealing with contributions.  Absolutely none.  The deduction can be taken in either year, subject to the following:

1) The plan termination date is in 2018

2) The amount considered and deducted in 2017 when added to what already has been considered and deducted for 2017 doesn't exceed the deductible limit under 404 for 2017.

3) If the plan termination date is in 2017 then there are some at the IRS who say that carte blanche exists with respect to 2017 deductions but 2018 deductions could be substantially impaired.