Chartered Retirement Planning Counselor (CRPC) Practice Exam 2025 - Free CRPC Practice Questions and Study Guide

A company can take a deduction for contributions made to an excess benefit plan in the year the employee receives the funds. This is because excess benefit plans are designed to provide benefits that exceed the limits set by the tax code for qualified plans. As a result, such plans are subject to different accounting rules, where the deduction is aligned with the actual distribution of funds to the employee.

The tax treatment for these plans reflects the approach that the deduction is not recognized until the employee has received the benefits, thus ensuring that the deduction corresponds with the actual expensing of the company related to the compensation of the employee. This arrangement helps maintain compliance with tax regulations regarding excess benefit plans.

Other options do not accurately reflect the deductibility timing for these types of contributions. Deductions in the year of contribution or plan establishment do not apply due to the nature of excess benefit plans. Additionally, the timing of when an employee reaches retirement age does not govern the deduction; rather, it is the receipt of funds by the employee that triggers the deduction for the company.