Late employer contribution

[Guest Melissa Winslow]

For the year ended 12/31/99, I have taken over a standardized prototype defined contribution plan with deferrals and fixed match.

During the 1999 administration of this plan I discovered that, for the plan year ended 12/31/98, the employer fixed matching contribution was used to satisfy the required top-heavy contribution (not good).

The sponsor would like to correct the error.

My question is two-fold: 1) Is there a penalty involved with making an employer contribution after the 12 month period following the end of the plan year (12/31/98)? 2) Should an estimate of the lost earnings be made as well? If so, what time period should it cover?

Any ideas? Citations?

[Guest JAREL]

Matching contributions may be used to satisfy top heavy minimums but then they are no longer tested under 401(m)'s ACP test. They are tested under the general test. Maybe you could try to use this fact to avoid having to make an additional contribution. See Reg. 1.416-1 question M-19.

[IRC401]

Contributions made in 2000 will be annual additions for 1999 or 2000, not 1998. If you allocate contributions for 1998 to the account of a participant who quit in 1998 or early 1999, you probably have a 415 problem.