Safe Harbor contribution not made

[CJS07]

Have a client who was to do Safe Harbor non-elective contribution for 12/31/2006. Form 5500 filed for 2006 included this contribution. Turns out client never made the contribution. What are the appropriate steps to fix this? I assume they should make the contribution immediately and will not be able to claim the deduction on their 2006 tax return. Do they need to make up for lost interest? Should we amend 5500?

[Guest SWH]

Actually, just had this situation this year, too.

First, tax return for company has to be amended. Contribution no longer deductible. Keep in mind that the contribution will be deducted in the year, but you still have to meet max deductible limits with the current year's contribution and the missed contribution on same year.

5500 doesn't necessarily need to be amended b/c money is still an asset that is receivable by plan.

Earnings will need to be made up. I talked with IRS guy in Compliance -- Paul Hogan (his number is 206-220-6085, if you want it) about our issue because we had 05 and 06 not made. In our situation, we decided to do VCP submission b/c we had missed two years in a row. Just wanted to be safe if we were ever audited.

[JanetM]

This operational failure. Unless the plan was amended to be non safe harbor he must fund for 2007 also.

[CJS07]

Thanks for the comments/advice. How did you go about calcultating earnings?

[rcline46]

To calculate the earnings refer to Rev Proc 2006-27 (EPCRS)