Employer Contributions - Timing of Deposits

[Gadgetfreak]

It seems we are seeing conflicting information in EBIA, ASPPA and on these boards. If someone would be so kind as to fill in the following blanks regarding the depositing of Employer contributions for Plan and fiscal year ending 12/31/09:

1) If you have NOT filed an extension for your entity's tax return, a discretionary match must be deposited before _________ for a 2009 or deduction or before _________ for a 2010 deduction.

2) If you HAVE filed an extension for your entity's tax return, a discretionary match must be deposited before _________ for a 2009 or deduction or before _________ for a 2010 deduction.

And then the same two questions for:

Safe Harbor Match

SHNE

Employer Discretionary (PS)

QNEC

Most of these I am sure are the same but I want to get this all straightened out once and for all. We have generally provided clients with more stringent deadlines but I would prefer to have the most accurate info. Thanks in advance.

[Guest Sieve]

For all employer contributions (except the elective deferral, which still IS considered an employer contribution by the IRC), to get a deduction the contribution must be made by the due date for filing the tax return for that year (or, if the tax return is extended, and some of the extension is used, then by the extended due date for filing the return). So, since your question deals with a corproate taxable year which is the calendar year, then to get a 2009 deduction the contribution is due by 3/15/2010, or by 9/15 if the return is extended. Same dates for a 2010 deduction: i.e., 3/15/2011 or 9/15/2011 (with extensions, of course, if the appropriate date falls on a Sat or Sun).

This applies to all employer contributions you mention & more: discretionary match, non-discretionary match, SH match, SH QNEC, other QNEC, & discretionary PS.

Note that if the SH match is calculated on a payroll or monthly basis, then the contribution must be made by the end of the next quarter under the 401(k)-3 SH regs, but that has nothing to do with the deductibility of the contribution (which is based on tax return due dates).

[Tom Poje]

and thats for deductabilty. there are other issues involved and maybe thats what you are hearing confusing reports on.

there is the timing for annual additions, which I think is 30 days after the deadline for deductibility.

also to be used in the ADP/ACP test, you have 12 months after the end of the year to make the deposit.

safe harbor contributions also have until 12 months after the end of the plan year, unless its a payroll match.

[Gadgetfreak]

Yes. That is exactly the confusion. We have found one source that states all Employer contributions (assuming match is made on Plan Year) were due before the due date of the entity's tax return. If no extension filed, it would be due by 3/15/10 for a 2009 deduction. If an extension WAS filed, it would be due by 9/15/10 but would be a 2009 deduction if deposited before the actual filing or a 2010 deduction if deposited AFTER the filing but before the 9/15/10 deadline.

Another source stated that contributions must be deposited no later than 12 months after the end of the year (so 12/31/10 in this case). Now there is further information that says the deposit must be made 30 days after the deadline for deductibility.

Can anyone clarify please?

[Guest Sieve]

It was explained in an earlier post. Deposit by extended due date (i.e., by 9/15/2010 for calendar year taxpayer) and, if the extension was used, the deduction is for 2009. That is the only deductibility timing issue. COntribution after that date is deductible in 2010.

Depositing 30 days after dededuction limit is for Section 415 limtiations only, and the one year rule is for purpsoes of using ADP/ACP testing. Neither of these is a deduction timing issue.

Don't mix apples & oranges.

[ESOP Guy]

and thats for deductabilty. there are other issues involved and maybe thats what you are hearing confusing reports on.

there is the timing for annual additions, which I think is 30 days after the deadline for deductibility.

also to be used in the ADP/ACP test, you have 12 months after the end of the year to make the deposit.

safe harbor contributions also have until 12 months after the end of the plan year, unless its a payroll match.

Does anyone have the cite for the ADP/ACP test part of the above?

I know the cite for the other parts.

Thanks

[Guest Sieve]

ADP = Treas. Reg. Section 1.401(k)-2(a)(4)(i)(A)(2).

ACP = Treas. Reg. Section 1.401(m)-2(a)(4)(iii)©.

[ESOP Guy]

ADP = Treas. Reg. Section 1.401(k)-2(a)(4)(i)(A)(2).

ACP = Treas. Reg. Section 1.401(m)-2(a)(4)(iii)©.

Thanks

[ESOP Guy]

Ok, I think I have a grasp on how this is suppose to work.

My client simply forgot to deposit the 2009 match. He would like to keep his promise to all his employees.

Is there a correction method to do that? The hardest people are the terms with no compensation in either 2010 or 2011. They can't have an annual addition so they would seem stuck.

Can this be fixed via a correction method?