Contribution Crediting Rules under Section 415

[Guest CharlieLaur]

Subchapter-S corporation on extension for 2008 until 9/15/2009.

Client deposits discretionary employer contribution on 9/15/2009.

For reasons unknown, the safe-harbor match is not deposited until 11/15/2009.

Principals usually receive the maximum annual additions under IRC Section 415.

As I understand the situation, the amount of the safe-harbor match is treated as an annual addition for 12/31/2009 rather than for 12/31/2008. Assuming that the safe-harbor match for 2008 (deposited on 11/15/2009) was $9,200 for Charlie Shareholder, his maximum “new” contribution for 12/31/2009 (excluding the 2008 safe-harbor match) would be equal to $39,800 rather than the normal $49,000.

Are there any exceptions to the IRC Section 415 contribution crediting rules that would help in this situation?

Any other thoughts?

Thanks for your consideration of this problem.

Charlie Laur

[Kevin C]

What does the plan document say about when the SH contribution is due? Typically documents have a provision saying that employer contributions are due by the due date for the tax return, including extensions thereof. Hopefully, your document says that. If it does, they have an operational failure because of the late deposit. Rev. Proc. 2008-50 corrections have a section 415 exception that will treat the correction as a 2008 annual addition. Assuming they are not under examination, they should be able to use SCP to correct.