The Tax Cuts and Jobs Act of 2017, with its signature provision of reducing the corporate tax rate from 35% to 21% in 2018, may have an indirect impact on defined benefit (DB) plan sponsors. This is most applicable to corporate DB sponsors seeking to maximize the tax effectiveness of their contributions.

In this Q&A, Justin Owens answers the following nine questions:

  1. How has tax reform affected DB plan sponsors?
  2. What is the deadline for making these contributions to receive the higher tax deduction?
  3. Is there a limit to how much a DB sponsor can contribute?
  4. What is trapped capital?
  5. What other advantages are there to funding more than the minimum required contribution?
  6. Will a large contribution reduce future required contributions to the plan?
  7. What is the industry trend for discretionary contributions?
  8. Where are companies finding the funds necessary to make these contributions?
  9. Is there anything else DB sponsors should be considering?