Deductions for Contributions to Plans for Employees of Controlled Group Members (Posted January 8, 2005) Technical Tip 136: The following question and answer were from the IRS Q&A Session at the 2003 ASPPA Annual Conference: Employer X acquires Employer Y, and Employer Y subsequently declares bankruptcy. Employer Y sponsors a defined benefit plan. Can Employer X, as a member of a controlled group, deduct contributions to the defined benefit plan sponsored by Employer Y if Employer X has no employees covered under the plan? Response: No. Employer X cannot deduct the contributions to the plan of Employer Y. The deduction is only available under Code section 404 for an employer who directly employs the participants, notwithstanding the fact that all employers in a controlled group are jointly and severally liable for the minimum funding requirements. See the legislative history of OBRA ’87. View all Tips © 2012 Reish Luftman Reicher & Cohen, a Professional Corporation Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation.