Safe Harbor Match

[jkdoll2]

I have a plan that does an annual safe harbor match. They always file an extension for the plan.

If they dont fund the safe harbor match by 9/15/08 (they are an S-Corp) what are the remifications? Is there any sort of penalty since it is a required contribution? Does the plan have to be tested. They will probably make the contribution in October. What about their corporate taxes - they did use it for a deduction. Thanks

[ERISAnut]

NO, there is no penalty since it is not a required funding under Section 412 of the Code. As long as they fund the contribution by the extended tax filing deadline, all your issues are fine.

[Kevin C]

9/15 is the extended tax return deadline for an S-Corp.

For the plan, if it is deposited by 10/15, it can still be counted as an annual addition for 2007. If you delay past 12/31, you violate the safe harbor rules.

For the tax return, you may already have an issue. I have been told that under some accounting methods, you can't deduct contributions on a return if the contributions are not deposited before the return is filed. Check with their CPA to get an answer.

The penalty question has already been answered.