If the PBGC premium is paid by the corporation, can it be counted as a contribution to the plan?

Did it go through the Trust? If not, then it isn't a contribution.

Why?

What is the reg?

If the premium is paid from the trust, is the contribution modified to include an expense load of at least the amount of PBGC premium?

If not, then you are attempting to amortize the PBGC premium over the average future funding period.
Is that your intent?

Or maybe you are just managing cash flow for one year by using a plan expense item to meet the FSA and avoid a deficit. I don't like it, but maybe I don't see the reasons for the question.

Here is my thinking

Can't the plan pay its administrative fees? Can't the plan pay the pbgc fees?

Can't fees paid on behalf of the plan by the er be considered contributions? then can't the pbgc fees paid by the er be considered contribution?

Can't the plan pay its administrative fees? - yes, generally the "Trust" can pay most admin fees - see DOL guidelines for more info.

Can't the plan pay the pbgc fees? - yes, the Trust can pay the PBGC "premium". (not sure about PBGC "fee" - the PBGC can charge penalties that can not be paid by the Trust)

Can't fees paid on behalf of the plan by the er be considered contributions? No, a fee paid directly by the employer is not a contribution. It may be deducted as a plan expense, but it is not considered a contribution.

Why is this important to treat it as an employer contribution and not an general expense? It is deductible either way. Are you trying to avoid a funding deficiency?

i guess we keep going in circles... so this is my problem

2006 Minimum Required Contribution = 30,000
Employer Contribution so far = 25,000
Plan administrative Fees paid by the ER = 3,000
PBGC Premium paid by ER = 2,000

How much would you say the employer has paid towards the 2006 MRC? 25k, 28k, 30k


For the record, I believe that the PBGC Premium isn't deductible, but I have a client who refuses to contribute more because they believe it is.

I would say they have contributed 25K and they still owe another 5K to satisify min. funding requirements.

This assumes that when the 30K was determined there was no explicit expense assumption, but even then, since the 5K wasn't actually contributed to the Trust, I don't see how they can call it a contribution.

They should be able to deduct 3K fee and the 2K premium as business expenses, but not as employer contribution. I think they still owe the plan another 5K.

When you say you "believe that the PBGC Premium isn't deductible", I assume you mean as an ER contribution. Is that right? Why would the client challange your conclusion? Just tell them if they don't put in another 5K, then you will show a deficiency on the Sch. B and they can explain their position to the IRS.

Also, with the new deduction rules applicable in 2006, the max may be much higher.

abanky,
If it helps to have consensus, I agree 100% with Effen's comments.

What was it? 99% before the edit?

I guess my confusion lies with if the plan pays 2k in fees and then the sponsor pays the plan back 2k, that 2k is considered a contribution... but if the sponsor pays the fees directly its not... so everything must go into the plan first.

But the circular reasoning here is the point. The 30k contribution was probably developed assuming employer paid the expenses. Certainly the "plan" can pay the expenses of operation; of course, that payment should be reflected either by an expense load or a direct addition to the otherwise developed costs of funding. A little different circumstance than a DC plan; if the trust pays those expenses and that isn't built into the model, then assets are that much shorter.