Missed Safe Habor Contribution

[Guest Michael Anderson]

We took over a Plan and discovered that they did not pay the 3% Safe Harbor contributions for 3rd and 4th Quarters of 2002. Last week, they calculated who should have received what and sent it in. But they passed the 12 month following the end of the Plan Year rule. What corrections need to be done? Is it similar to late EE deferrals? Any help on thsi one would be appreciated. Thanks!

[Archimage]

You would have to put in the contribution. Since the deadline was missed you will need to run your ADP/ACP tests. If you pass then you are good to go. If you fail then you would have to correct accordingly. A couple of things to be aware of:

1. The contribution will be deductible for the employer in 2004.

2. If the plan fails the ADP test then you can use the prescribed "one-to-one method under appendix B of the EPCRS

[Guest crosseyedtester]

It has been determined that a plan missed a small safe harbor 3% contribution. The plan year ended in early 2003 and the amount, for a vested participant who terminated on the first day of the plan year, was $2.30. No safe harbor contribution was made in the following year. Any thought how this should be treated? The participant has not yet taken a distribution.

[Tom Poje]

I would follow the guidelines set forth under the self correction program. It sounds like an operational failure (Failure to follow the terms of the document) usually that means sumpliy making the missed contribution for the particpant, plus any adjustments for gains.