Discretionary 401(a) Contribution

[Cathy from Chicago]

At the ASPA meeting and heard that if a plan has a discretionary P/S contribution it is only allowed to be deposited annually rather than throughout the Plan Year. Is this true and, if so, where can I locate the code siting it. Thanks in advance for any help on this issue.

[IRC401]

It is not true, but the plan document needs to have provisions dealing with what happens to the money between the date of deposit and the date of allocation to participant accounts.

[Tom Poje]

IRS Q and A #9 from the 2002 conference:

Q.can you fund discretionary contributions more frequently than annualy, even though your document allocation date is only annual

A. The allocation must follow plan terms

by the way, as a reminder, the Q and A are only opinions, and have not been reviewed or approved by the Service or Treasury.

On the other hand, sometimes they are merely stating the law as is - it is sometimes hard to tell which is which.