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Safe Harbor Match Deposit Deadline

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4 replies to this topic

#1 jvandyke


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Posted 02 September 2009 - 11:57 AM

I have an employer that did not make their safe harbor match for 2008 regularly. They are just now funding most of it. Since it is due, latest, by the end of the quarter following payroll, it is a late deposit. What is the correction method for this?


#2 Guest_named_Sieve_*

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Posted 02 September 2009 - 12:44 PM

I assume you know that quarterly deposits of SH matching contributions are only required if the match is calcualted on a payroll (or monthly) basis. If the SH match is calculated on an annual basis, the contribution need not be made until the due date, as extended, for the sponsor's income tax return.

If there are late quarterly SH matching contributions, then the fix, presumably, would be to make the contributions with earnings (based on the match's required due date).

#3 jlmn


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Posted 22 September 2009 - 12:10 PM

We have missed (due to financial hardship) some of our safe harbor QNEC contributions in 2009. The missed contributions began in late March 2009 and we plan to restart the normal QNEC employer contributions again at the beginning of October. We wish to "make good" on the QNEC employer amounts missed from March through September (things are better for us now financially)... and we wish to still be exempt from ADP testing. We have noted in our 2009 Safe Harbor QNEC Notice that contributions are on a per pay period basis. From your post and other articles online, it appears that we would have until the end of the quarter following the missed pay periods to make up the amounts - our plan would be to pay earnings from that last day of the next quarter through the date the money is actually deposited into the participant accounts. For example, missed deductions in March would be deposited with earnings/losses calculated from 6/30 through date of actual principal deposit. Missed deductions in April through June would be deposited with earnings/losses calculated from 9/30 through date of actual principal deposit. Missed deductions in July through September would need to be deposited by 12/31 (although we plan to do this in October... and sounds as though we wouldn't need to calculate any missed earnings/losses?).

Our 401k provider, on the other hand, is suggesting that we use a "highest rate of return" calculation and apply that earnings/loss percentage to the entire lump sum amounts missed since March. To us, that seems to very skewed b/c that would mean that all participants could likely have 40% earnings applied to the entire missed sum... (we have a fund that has had stellar performance since the beginning of the year... and even if participants aren't invested in that fund, they would still get that earnings percentage applied!).

What are your thoughts regarding our alternate strategy for "making good" on our safe harbor QNEC amounts? Do you think we'd be able to make a decent argument that we complied with our Safe Harbor obligation and that we'd be exempt from ADP testing for 2009? Also, do you have a link to the IRS or DOL site which references that safe harbor contributions (if they are on a pay period basis), must be deposited by the last day of the following plan quarter?

#4 MWeddell


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Posted 22 September 2009 - 01:27 PM


Can you describe more precisely the contributions that were late? Are they safe harbor matching contributions (at least 100% match on 3% of pay and 50% match on the next 2% of pay)? Or are they the 3% safe harbor nonmatching contributions?

Right now, it's confusing to follow because the first two posts from this thread refer to safe harbor matching contributions, for which there is the three-month deadline if they are allocated for periods shorter than the whole plan year. On the other hand, your post uses the term "QNEC" which typically refers to nonmatching contributions.

#5 jlmn


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Posted 22 September 2009 - 01:31 PM

We have the safe harbor QNEC (3% of pay to all eligible individuals whether they are contributing or not). Wondering if we can use the same guidelines as the QMAC... the QNEC does not seem to have as many set guidelines out there. Thanks!