"Late" safe harbor non elective

[Guest dhall]

Client allowed 4 ineligible EEs to defer (2007 plan year), and thus we, as the TPA, informed them that they must also allocate the 3% non elective contribution to them as well.

I read that the safe harbor non elective can be deposited as late as 12 months after the end of the plan year.

So, I figure that the additional contribution can be deducted on the 2008 corporate return, and included as a contribution on the 2007 5500???

[ERISAnut]

Client allowed 4 ineligible EEs to defer (2007 plan year), and thus we, as the TPA, informed them that they must also allocate the 3% non elective contribution to them as well.

Probably not a good idea to correct a failure to follow the written terms of the plan with another failure to follow the written terms of the plan. If an ineligible employee was allowed to defer, then that should be cleared up under a mistake of fact. But to actually provide additional employer contributions to employees who are not eligible would appear to compound the problem.

You should explore the different corrective measures available under EPCRS (specifically SCP) prior to making suggestions to further fund ineligible employees. Just a thought.

[K2retire]

Unless, of course, you meant that part of the correction was going to be a retroactive amendment to the plan followed by filing for a D-letter, as outlined in EPCRS.