What Is the Defined Benefit Plan Contribution Deadline?
Explore how defined benefit plan contribution timing aligns with business tax filings to ensure deductibility and avoid funding deficiencies.
A defined benefit plan is an employer-sponsored retirement plan that guarantees a specific benefit payout for employees upon retirement. These plans place the investment risk on the employer, who is responsible for making contributions to ensure the plan has sufficient assets to cover its promised obligations. Adhering to contribution deadlines is necessary to maintain the plan’s funded status and for the business to claim a tax deduction.
Determining Your Final Contribution Deadline
The deadline for making a tax-deductible contribution to a defined benefit plan is tied to the due date of the employer’s federal income tax return, including any extensions. The specific date can vary depending on the business structure. For sole proprietorships and single-member LLCs filing a Schedule C, the initial deadline is April 15. For partnerships and S corporations, the deadline is March 15, while C corporations have an April 15 deadline.
An employer can extend the contribution deadline by filing for an extension for their business tax return. Filing Form 7004, for instance, pushes back the tax filing due date and, consequently, the final date to contribute to the plan for that tax year.
There is an ultimate deadline that applies regardless of tax extensions. The final date to make a contribution for a plan year is 8.5 months after the end of that plan year. For a plan operating on a calendar year, this final deadline is September 15 of the following year. For example, a calendar-year S corporation’s 2024 contribution deadline is initially March 15, 2025, but a tax extension moves the final deadline to September 15, 2025.
Quarterly Contribution Requirements for Underfunded Plans
Separate from the final annual deadline, some plans are subject to quarterly contribution requirements. These rules apply to plans considered “underfunded,” which means the value of the plan’s assets is less than its funding target. When a plan falls into this category, the employer must make contributions in four installments throughout the plan year.
For a plan that follows the calendar year, these quarterly payments are due on April 15, July 15, October 15, and January 15 of the next year. Each installment is 25% of the required annual payment. This accelerated schedule is to ensure that underfunded plans receive assets more consistently throughout the year.
Failing to make a quarterly payment by its due date has consequences, though they are different from missing the final deadline. Interest charges begin to accrue on the unpaid amount from the due date until it is paid. Additionally, the plan administrator may be required to notify plan participants and beneficiaries that a required quarterly payment was missed.
Consequences of Missing the Final Deadline
Failing to deposit the required contribution by the final deadline results in financial penalties for the employer. These consequences are distinct from the interest charges for late quarterly payments. The two repercussions are the loss of the tax deduction for the intended year and the imposition of an excise tax.
If a contribution is made after the final deadline, the employer loses the ability to claim a tax deduction for that amount on that year’s tax return. The deduction is deferred until the tax year in which the contribution is actually made. This timing shift can impact the business’s tax liability for the year the contribution was originally due.
An “accumulated funding deficiency” triggers an excise tax under Internal Revenue Code Section 4971. This tax is applied in two tiers. Initially, a non-deductible tax of 10% is imposed on the amount of the funding shortfall. If the employer fails to correct the deficiency by making the required contribution within a specified correction period, the tax escalates to 100% of the deficient amount.