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Facts: 401k Safe Harbor with Cross Tested Profit Sharing. Employer formed LLC effective 1/1/2021, was sole-prop for 20+ years prior to this. First payroll date was technically 1/12/2021, with bi-weekly payroll thereafter, however, the new LLC bank account was not yet established so all employees were paid a reasonable "Advance" on 1/12/2021 equal to estimated pay (estimated hrs * hrly rate reduced for estimated taxes etc). All employees are hourly paid. It should be noted the 401k estimated deferrals were not remitted over to the plan at this time. The plan was to reconcile all with the 1/26/2021 pay date, in the new LLC account with the new system being implemented. Thereafter the new LLC business account was established, new system set-up, and the first official payroll was processed for 1/26/2021 pay date. With this payroll, the bookkeeper logged all hours year to date (i.e. including hrs for pay date 1/12) making gross wages correct for year to date (both 1/12 and 1/26). Taxes and 401k* were determined, the "1/12/2021 advance" figures reflected, and the resulting net pay to employee determined. *Herein lies the problem: only 1/26 pay date's 401k amounts were accounted for, missing were the 1/12/2021 amounts. Total 401k reported as of 1/26/2021 $956.25 -- this amount was short by the 1/12/2021 payroll's total 401k withholding $922.50. Good news/bad news: The bookkeeper caught her mistake when she remitted the deposit over to the Plan and deposited $1,878.75 -- 1/12/2021's $922.50 plus 1/26/2021's $956.25. (This 1,878.75 matches the employee deferral elections in place and gross wages paid.) Only problem was she never went back into payroll and made adjusting entries to "account" for the correct 401k amounts remitted over to the Plan. Therefore, the three participants affected received the $922.50 in their net pay (i.e. in their pocket). Because of this the W2s are correct as issued. Questions: Can the $922.50 be deemed an employer corrective contribution and a notice issued at this time, or, should it be considered an "unallocated suspense" amount to be applied at a later date? My concern with the former is that it is more than the prescribed correction -- is this acceptable (can correction be more than guidance prescribes) or is it prohibited?? And if the latter, can the employer apply it towards the 2021 Safe Harbor (3% non-elective) contribution to be deposited by 10/15/2022? If the $922.50 can not be deemed an employer corrective contribution at the time is was deposited, a correction is needed for the missed deferral opportunity (1/12/2021 pay date). Is it the missed known amount per participant or 50% of the average NHCE deferral rate? All employees are still employed; no Correction Notice has been distributed. It is a balance forward plan. Thank you so much.

A large payroll company (10,000+ payroll clients) marked box 13 with an X for a 401(k) participant who made no elective deferrals to the plan nor receved an employer contribution for 2019. There is no DB plan. So the employee received no employee or employer contribution into the plan account in 2019 nor was there any employer accrued contribution 2019. The employee was planning to do a deductible max IRA. the employer specifially told them - no X for this person. The Payroll company said because there were 401(k) loan payments they had to mark Box 13 with an X. That has to be wrong in my opinion. I gave them the IRS instructions on this with examples of no employee nor employer contribution but it doesn't say anything about loan payments - probably didn't think it needed to! Comments?

This seems like a ridiculous question. However, I'm suffering from pre-holiday brain cramp... Suppose your plan defines comp as W-2. Further suppose that the employer buys shoes for its factory workers, and, I don't know, maybe something like gym memberships. The employees don't have the option to receive this money in cash, but it is still taxable compensation, and included on the W-2 because it is a "nonaccountable" plan according to the employer's CPA. I proffer no opinion as to whether that is correct or not - I'm assuming it is correct for purposes of this question. From a practical viewpoint, how would this be handled when calculating the deferral amount to come out of the employee's paycheck? I assume this is really a payroll/employer problem. For example, base pay that would otherwise be paid to the employee for the year is $10,000, and employee defers 5%. But, there is TAXABLE fringe benefit of another $1,000, and the employee's W-2 is going to show $11,000. Does the employer/payroll company, at some point, have to withhold another $50 from the employee's paycheck? Or, since the employee could never have elected to receive this compensation in cash, is it simply ignored for deferral purposes?