Prohibited Transaction on late employer contribution?

[jquazza]

Plan sponsor of a Safe Harbor 401(k) failed to remit the Safe Harbor contributions for PYE 12/31/02. They will ultimately deposit the contributions adjusted for earnings. The auditor insists that a schedule G should be included with the 5500 to report prohibited transactions on the use of plan assets.

I arguing that unlike participant deferrals, which become plan assets as soon as the sponsor can segregate them, employer contributions do not become plan assets until actually contributed to the trust and therefore there is no PT for use of plan assets.

Does anyone think we have PTs to report?

[Guest Pensions in Paradise]

Not sure about the PT issue (although I would take the same position as you that it is not a PT). However, my concern is that since the safe harbor contribution was not made by the due date, the safe harbor contribution cannot be allocated for the 2002 plan year. Thus, the plan would not be a safe harbor plan for 2002 and the ADP/ACP tests would have to be performed.