Top Heavy Minimum Deadline

[Dougsbpc]

I know this has been discussed before and I have read some past discussions on this.

Assuming the employer already has losses and does not want the deduction, when must the top heavy minimum contribution be funded?

Apparently there is no deadline other than 30 days following the extented corporate tax filing deadline if the contribution is to be allocated for the prior plan year.

Is anyone aware of any recent clarification on this issue?

Thanks much.

[Dougsbpc]

The plan in question is a 401(k) plan not a pension plan.

[SoCalActuary]

If the plan has no annual addition for the Key employees, the TH min is zero.

However, I guess you must have deferrals by the Key. The contribution is required to avoid disqualification (which I would guess to be unacceptable). So you should advise to make the 3% TH payment to eligible non-keys, or risk DQ.

[K-t-F]

The question being "when is the TH min due" would be by the time you file your corp tax return (with extensions) to take the deduction.

[Bird]

The question being "when is the TH min due" (period).

I think the answer is the end of the following year. Can't find a cite right now, sorry.

[Tom Poje]

I believe you are correct, by the end of the year.

deduction would then be in the year made, and I believe it counts toward the 415 limit in that year as well

[Dougsbpc]

In this case, the employer does not care about the deduction. The plan has a June Year end, they are on extension until March 15 and will probably be able to fund the contribution by March 30.

I have tried to find a cite that identifies a deadline but havent found one. There have been prior discussions on this that indicate there may not actually be a deadline.

For example, suppose the 415 issue is not a concern in the next plan year and the employer makes the June 30, 2004 top heavy minimum contribution on July 31, 2005 (one month beyond one year). Is there any consequence?

I dont want to beat this to death, just curious if anyone is aware of any recent clarification on this issue.

[mbozek]

There is no required date for making contributions to a PS plan since the 412 rules dont apply. Contributon not made by 30 days after tax return is not counted under 415 limit in year allocated. Contribution not made be date for filing tax return with extension is deductible in year made. ER could make contribution in later year to claim deduction. Need to see when plan requires TH contribution to be made by er.

[K-t-F]

To follow up on my understanding, the TH contribution for a plan year can be accrued and as long as it is paid by the time the corp returns are paid then it would be deductible for that year. If paid after then deductible in the year it was paid....

[Bird]

dougsbc, I am more certain that it is 12 months after the end of the year; still don't have a cite. We handled a "project" in which TH contributions weren't made for '02 and '03; we had the client make up the missing contributions - without an earnings adjustment for '03, since the money went in in '04 - and with earnings for '02, since it was more than 12 months after the end of the year. (As provided under SCP.) I researched it pretty carefully at the time; just went through the papers and still can't find the cite. You might want to poke around in the EPCRS guidelines, but I don't guarantee it's there either.

[Guest annieap1]

I found this under "Pension Administration and Trust Accounting": Top Heavy Contribution must be made by the last day of the following plan year.