er matching deposit deadline

[Guest beckyhummer]

i have a qualified plan sponsor who does not intend to deposit a 2000 matching contribution prior to the corporate tax filing deadline (9/15/01). the sponsor is not concerned about this being a tax deductible contribution for 2000. currently the plan doc says that the contribution must be deposited by the corp tax filing deadline, however, the attorney has said that he could amend the plan to allow for a later date.

what is the drop dead date for depositing this contribution. other than deductibility, what are the ramifications of a late deposit?

thanks!

[Tom Poje]

one possible issue is 415 limits (though come 2002 maybe then it wont be a big deal)

you have 30 days after all extensions to still be able to treat the contribution as an annual addition for the prior year

[Guest CMC]

Tom,

What's the authority for the idea that employers have until 30 days after the latest due date for the corporate income tax return to make a matching contribution for the prior year?

Thanks.

[Tom Poje]

1.415-6(B)(7) Time when annual additions credited

(ii) ...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)

and 404(a)(6) says contributions deemed made ....not later than the time prescribed by the law for filing the return (including extensions)

[Guest CMC]

Tom,

Thanks for this.

I'm looking at a 401(k) plan that has just finished calculating its matching true-up for 2000. The plan is more restrictive than your reg. It requires the employer to "pay its contribution for each Taxable year to the Trustee within the time prescribed by law for the filing of its Federal income tax return for such year, including extensions of time." Question is how best to deal with this now that September 15th has come and gone.

What if we:

(1) amend the plan to provide for the additional 30 days allowed by the reg.;

(2) make the contribution before October 15th so that it counts as an annual addition for 2000; and

(3) deduct this amount in 2001 (being mindful of the need to watch limits closely in this year).

Sound o.k.?

[GBurns]

Watch out for retroactive plan amendments.

Look for anything that allows the correction of administrative errors, this might give you the best way out.

[Guest CMC]

I guess the power to correct errors is arguably included in the powers granted to the Plan Administrator, although it doesn't appear to be expressly stated.

But where does that leave me? If the plan requirement is more restrictive than the reg. Tom points out (b/c it requires the contribution to go in by September 15th rather than October 15th), is this just a failure to follow the terms of the plan that can be corrected by making the contribution now, together with earnings from September 15th? Or is there some other consequence to this being late that I'm missing?