|Mercer||https://goo.gl/rPDhV8||Mercer Intellectual Capital Solutions Tax Reform Pension Plan Contributions Under New Tax Laws with Paul Strella
So sponsors of pension plans have a last chance to make contributions to their pension plans this year and deduct them at last year’s 35% marginal tax rate. The idea is fairly simple. If you consider a company with a calendar year tax year, and a calendar year pension plan, the company has until September 15th to make contributions to that plan and contribute them back to the 2017 plan here, and then deduct those on its 2017 tax return at the old 35% marginal rate instead of the new 21% marginal rate. This idea makes particular sense for a company that has an underfunded pension plan and is anticipating making contributions in future years. It might rather consider accelerating those contributions and making them now so it can deduct them at the old 35% marginal rate instead of the new 21% marginal rate. In addition, any contributions made now may help reduce PBGC variable premium which would be an added advantage. Now I mentioned September 15th before as the deadline. There is an argument that a calendar year tax payer would have until October 15th instead, so from a timing point of view, that’s one thing to look at. A company with a non-calendar year tax year may have an earlier deadline to make contributions because for a non-calendar year tax year, the last tax year at the 35% marginal rate actually ended in 2017, so the deadline for making contributions for the 2017 year is going to come u earlier than September 15th. So companies in that situation need to be there, their timing, finally the timing issues get a little trickier if the pension plan year and the company’s tax year are different. So anyone in that situation needs to look very carefully at the timing issues but regardless of the situation, this is a really great, attractive one-time opportunity that companies should be looking at now.
Our deep expertise, powerful insights, and real-world solutions help the people and organizations we serve take steps today to secure a better tomorrow.
- - - - - - -