Match deposited timely but not allocated timely

[Guest notapensiongeek]

2004 calendar year 401(k) Profit Sharing Plan (earmarked accts.) that has a discretionary matching contribution. The client deposited the match into the trust (non interest bearing cash account) before the due date of the Corporate tax return (9/15/2005), but the allocation to participant accounts didn't take place until 3/15/2006.

What issues do we need to look at here? This doesn't pass the smell test.

Thanks in advance for any input!!

[david rigby]

What do you mean "allocation"? Did anything happen between 09/15/05 and 03/15/06? Anyone paid out? If not, do you have a problem?

What does the plan say?

[Guest notapensiongeek]

The plan has earmarked accounts set up for each participant, as well as a "general account" (non interest bearing account). The money was put into the GA 9/15/2005 but the match did not get transferred (I had said allocated) to each e/m account until 3/15/2006. No deduction issue here since it was deposited timely (by due date of tax return) but I am wondering if there are any other issues I need to look at. Doc. doesn't address this.

[JanetM]

IMHO you have fiduciary issue in that the funds left in the GA didn't earn anything. Doesn't seeem to be prudent investment made on befalf of the participants.

[Guest notapensiongeek]

I definitely agree it's a fiduciary issue, but since it's a discretionary employer match, what would the correction be, if any? I can't see the client wanting to allocate "lost earnings" on a discretionary contribution for over 200 participants. But if that's the conservative approach, I'll let the client know that's what they should do.

Thanks!