Profit Sharing plan contributions

[Guest Achilles]

I'm the consultant on a stand alone profit sharing plan, no EE deferrals permitted.

The client uses a discretionary formula.

Past years they have made annual contributions in the area of $15,000 - $20,000.

2004 they did one for $5,000, and zero for 2005 and 2006.

Does the discretionary formula allow for this, or would their still be a "substantial and recurring" issue?

Thanks in advance.

[JanetM]

Its a facts and circumstances issue. Was the plan put in for exclusive benefit of employees (not just HCEs)? Is the reason for no contributions that there was no business profit for the two years? Treasury reg 1.401-1(b) is the cite.

[401_4_ever]

I agree with what Janet said. It's a facts & circumstances issue. Additionally there is an IRS notice out there that says no contributions for 3 out of 5 years will cause a "presumption" of a plan termination because of the substantial & recurring issue.