Blogging Employee Benefits

March 24, 2006

Post-Spinoff DB/DC Deductibility

Filed under: Deductibility — Fuguerre @ 10:31 pm

A recent IRS private letter ruling addressed deductibility of employer contributions after spin-off of a portion of a multiemployer defined benefit plan, constituting assets and liabilities attributable to former employees who had never been eligible to participate under a separate multiemployer defined contribution plan. After the spin-off, there will continue to be active and inactive participants benefiting under both the parent defined benefit plan and the defined contribution plan; hence, employer contributions to those overlapping plans will be subject to the deductibility limitation of IRC §404(a)(7). Contributions to the spun-off plan, which does not overlap with the defined contribution plan, will be subject to the deductibility limitation of IRC §404(a)(1), without affecting the 404(a)(7) limit applicable to the other two plans. [PLR 20061201]

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