timing for allocating employer contribution

[Scuba 401]

if the employer contributes the profit sharing contribution by the deadline for taking a a 2009 deduction (september 15) when must the contribution be allocated to participants. can it be allocated at a later date or should it be done immediately?

[My 2 cents]

I don't work with defined contribution plans, but my guess is that there are "as soon as administratively feasible" constraints for allocating contributions after they are made.

Also, does an employer have so long a time to make a profit sharing contribution? Never mind deduction limits, but shouldn't the 2009 contribution have been made months ago? Again, forgive my ignorance on this point, but wouldn't something like 3 or so months be more reasonable? However and whenever allocated, that is a long time to be unable to earn anything on last year's employer contribution.

[Scuba 401]

I don't work with defined contribution plans, but my guess is that there are "as soon as administratively feasible" constraints for allocating contributions after they are made.

Also, does an employer have so long a time to make a profit sharing contribution? Never mind deduction limits, but shouldn't the 2009 contribution have been made months ago? Again, forgive my ignorance on this point, but wouldn't something like 3 or so months be more reasonable? However and whenever allocated, that is a long time to be unable to earn anything on last year's employer contribution.

i think the contribution must be made to the plan by the deadline for filing the corporate tax return in order to get the deduction.

[My 2 cents]

My comments were not directed to the deadline for taking the deduction, but for when the contribution needs to be made at all. I agree that to get the deduction, the contribution has to be made by the filing deadline.

I have since been informed that taking it to that limit is acceptable under governmental rules, and that presumably the DOL or IRS would not count a contribution close to the filing deadline as not timely.

[Bird]

I assume you have an individual account plan, and the employer wants to contribute some dollar amount but you don't know how to allocate it to the individual accounts? It's really two issues, deductions and then following the terms of the plan which calls for self-direction. The deduction issue is simply that the money must be contributed by the deadline, Sept 15 if it is a corp, partnership, etc on extension to that date. It can go into a checking account or a holding account within the platform. Getting it into the individual accounts doesn't have a specific deadline that I know of; I'd think within a month or so is reasonable and a year, not so reasonable.

[TPApril]

Different question, though somewhat related to this thread:

Money Purchase Plan (calendar plan year) - sponsor makes monthly contributions. 2010 had sufficient forfeitures so that part of the 12/2010 deposit was included in the 2010 allocation, but part of it ($1,000 per prior TPA) was to be assigned to the 2011 contribution so as not to exceed the required contribution. Prior TPA provided client with the report last week (with caveat to consult their cpa), so it is likely the full contribution was deducted by the corporation for 2010. Is that allowed, or do their taxes need to be restated? Is there any issue with including it as part of the 2011 allocation? At this point it is also possible that too much was deposited for (and during) 2011 as well.

[Kevin C]

When was the December 2010 employer contribution deposited? Hopefully it was deposited in early January 2011.

With monthly deposits of required contributions, we amend the plan to provide that forfeitures reduce the contribution in the year following the year of forfeiture.

[TPApril]

Actually, it is the November 2010 deposit that went over the annual contribution amount when it came through in December. Yes there was also a December deposit that went through in January. I'm thinking 2011 will be thrown off as well. Good suggestion on the forfeiture amendment. I'm gonna go ahead and use those amounts towards the required 2011 contribution and contact client cpa.