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Santo Gold

due date for non-profit ER contribution

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I could really use some support on several questions I am receiving from a non-profit that sponsors a 403(b) plan. The answers seem obvious but to the individuals involved, they are taking a very basic look at things and are questioning everything. The plan is as follows:

An ERISA calendary year 403(b) plan

fiscal year = calendary year

21 & 1 with eligibility for ER contribution with monthly entry

1000 hours needed to share in the ER profit sharing contribution, but no last day requirement

no match contribution

individual accounts for all participants

The questions center on:

(1) What is the deadline for depositing the ER contribution? That is, for 2011 plan year, what is the latest that the organization has to deposit the ER contribution? Because this is a non-profit, the normal 3/15 deadline does not apply, correct?

(2) Several individuals are asking why the ER contribution is not deposited on a more frequent basis, at times hinting that it gives the appearance of something not being legit in that the organization is holding onto the ER contribution for so long. Obviously the EE contributions go in immediately, but what support can I point to so as to demonstrate the ER contributions are treated differently from EE contributions and do not have the same deposit deadlines.

The 1000 hour requirement is an obvious reason that they should not deposit quarterly since if they deposit for someone who doesn't reach 1000 hours, they have to end up removing those dollars.

But their biggest concerns involve the ER deposit. The HR person deposits annually within 3 months after year-end. That seems perfectly fine, but others do not agree.

Thanks for any comments

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The due date for employer contributions is in

1.415©-1(b)(6)(i)(B)Date of employer contributions.—

For purposes of this paragraph (b), employer contributions are not treated as credited to a participant's account for a particular limitation year unless the contributions are actually made to the plan no later than 30 days after the end of the period described in section 404(a)(6) applicable to the taxable year with or within which the particular limitation year ends. If, however, contributions are made by an employer exempt from Federal income tax (including a governmental employer), the contributions must be made to the plan no later than the 15th day of the tenth calendar month following the end of the calendar year or fiscal year (as applicable, depending on the basis on which the employer keeps its books) with or within which the particular limitation year ends. If contributions are made to a plan after the end of the period during which contributions can be made and treated as credited to a participant's account for a particular limitation year, allocations attributable to those contributions are treated as credited to the participant's account for the limitation year during which those contributions are made.

I would look to the DOL deferral deposit rules for your (2). They should be clear that they only apply to amounts withheld from employee paychecks

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I could really use some support on several questions I am receiving from a non-profit that sponsors a 403(b) plan. The answers seem obvious but to the individuals involved, they are taking a very basic look at things and are questioning everything. The plan is as follows:

An ERISA calendary year 403(b) plan

fiscal year = calendary year

21 & 1 with eligibility for ER contribution with monthly entry

1000 hours needed to share in the ER profit sharing contribution, but no last day requirement

no match contribution

individual accounts for all participants

The questions center on:

(1) What is the deadline for depositing the ER contribution? That is, for 2011 plan year, what is the latest that the organization has to deposit the ER contribution? Because this is a non-profit, the normal 3/15 deadline does not apply, correct?

(2) Several individuals are asking why the ER contribution is not deposited on a more frequent basis, at times hinting that it gives the appearance of something not being legit in that the organization is holding onto the ER contribution for so long. Obviously the EE contributions go in immediately, but what support can I point to so as to demonstrate the ER contributions are treated differently from EE contributions and do not have the same deposit deadlines.

The 1000 hour requirement is an obvious reason that they should not deposit quarterly since if they deposit for someone who doesn't reach 1000 hours, they have to end up removing those dollars.

But their biggest concerns involve the ER deposit. The HR person deposits annually within 3 months after year-end. That seems perfectly fine, but others do not agree.

Thanks for any comments

For tax rules for crediting contributions under annual contribution limits, see reg 1.415©-1(b)(6)(i)(B)- Employer contributions for a limitation year by a tax exempt organization must be made to the plan no later than the 15th day of the 10th calendar month following the end of the calender or fiscal year with or within which the particular limitation year ends. Employee contributions are not credited to the partuicipant's account for a limitation year unless they are actually made to the plan not later than 30 days after the close of the limitation year. For ERISA covered plans there are DOL rules that require employee contributions to be transferred to the plan within an accelerated period after compensation is paid.

In addition the date the employer contributions must be made will be governed by the terms of the plan.

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okay, I'm confusing myself here.

Sample nonprofit has a fiscal year starting 7/1.

Their 401(k) [not 403(b)] plan year is calendar year.

The deadline then for depositing employer contributions would be based on fiscal year, ie 10.5 months after 6/30, or 4/15 of the year after the year it ends.  I think an example would work better:

  • Plan year ends 12/31/19
  • Fiscal year that this plan year ends within ends 6/30/20
  • 10.5 months after that is 4/15/21.  Is this the technical deadline for employer contributions for such a 12/31/19 plan year?

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