What are plan sponsor's options if intended profit sharing contributio

[John A]

The plan year ended 05/31/1999 has a receivable PS contribution of $5,000. The $5000 is still receivable as of today, 2/22/00. The plan sponsor had a money crunch and wants to not make the receivable contribution. Can the plan sponsor choose to not making the receivable profit sharing contribution? Can the plan sponsor choose to not make the contribution if 1) the deduction has been taken or 2) statements have been passed out to the participants? If the deduction has been taken and/or statements have been passed out, what corrective steps need to be taken? What options does the plan sponsor have?

[Alf]

Two questions:

1) Does the plan require the matching contribution, or is it discretionary. If the contribution in required and participants have satisfied all of the requirements to recieve an allocation, it it too late to amend the plan document and the plan will be disqualified if the matchint contribution isn't made.

2) If the match is discretionary, the participants don't have a right to it until the money is allocated to their account. I doubt that including the money on their statement is enough to prevent it from being taken away. Of course, I would want to correct the disclosure issue as soon as possible, but if the money has not been allocated to the participant's accounts, a discretionary contribuiton can still be taken away. You may, however, face some type of reliance claims from the participants.

I don't think the employer's deduction should control. If the pension rules permit the contribution to be skipped, the corporate tax return should just be amended.

tching contribution is requeithe plan document can't be ame

[John A]

No matching contribution is involved, just the discretionary profit sharing contribution. I believe I agree with your answer. The conclusion is that, no matter what the plan sponsor communicated, since the profit sharing contribution was not made by 8 1/2 months after the end of the plan year, there cannot be a contribution for the plan year ended in '99. If statements have been given to participants, then corrected statements will need to be provided. And if the plan sponsor filed showing a deduction, an amended return will need to be done.

[Guest rhp]

The section 415 regulations state that contributions may be treated as made on account of a prior taxable year if actually contributed and allocated no later than 30 days after the due date for filing the tax return (with extension) for the year involved. 1.415-6(B)(7)(ii) Has that date passed? If so, it seems it would be too late to make the contribution.