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