Failure to make employer contribution deposit

[Guest 401kadmin]

10/01/04 -09/30/05 employer contribution was not deposited. We calculated lost earnings on the 2004 contribution and instructed the client to deposit the lost earnings with the 2004 and 2005 contribution. The client deducted the 2004 contribution amount and 2005 contribution amount on the 2005 corporate return. The client never made any of the deposits including the lost earnings and will be amending their 2005 corporate return. This client is not contributing to the 2006 plan year/tax year. The employer contributions are discretionary, not sure if that matters at this point. I believe this client will need to make the 2004 and 2005 contribution in addition to lost earnings for both plan years and also pay the 10% excise tax under Section 4972 for the nondeductible contribution amounts. Is this correct?

[Kimberly S]

You haven't provided enough information. The answer will be vastly different if the contribution is for a DB plan, a MPP, a safe harbor contribution or a discretionary PS.

[Guest 401kadmin]

It is a 401k Profit Sharing plan, with a discretionary match and profit sharing contribution formulas.

[Kimberly S]

It is my understanding that if a discretionary contribution is not deposited by the due date it cannot be allocated for that year.