Employer Contributions

[Guest Becki625]

Is there a penalty for a delay in depositing employer contributions. In this situation, the employer makes a 2% contribution into the individual 401(k) account irregardless of participation. It has been brought to the employers attention that some hourly employees rates were incorrect and in fixing that problem, they now have to go back and contribute additional funds to the base contribution they make each pay period. So my questions are:

1. Does the ER have to determine any interest lost on the late contributions?

2. Is there a point where if the contribution amount is considered negligible - no action required?

I have handled this with 401(k) employee contributions, but am unsure of employer contributions that are not match related. If you can also suggest a website where I can find additional informaiton that would be great.

Thanks for your assistance.

[Nate X]

An employer contribution that is made on an annual basis is due the employer’s tax return due date if it is to be deducible for the prior year [iRC 404(a)(6)]. Otherwise, it is due 30 days later [Tres Reg 1.415-6(b)(7)(ii)].

See my response on this discussion regarding how to correct it:

http://benefitslink.com/boards/index.php?s...c=32765&hl=

The amount does not have to be allocated to a participant if it would cause the participant to receive a corrective distribution of $50 or less if the administrative cost of correction is greater than the corrective distribution [Rev Proc 2002-47]. However, the corrective amount must still be deposited into the plan.

[Guest Becki625]

NateX,

Thank you for your assistance.

Becki625