Safe Harbor deposit due date?

[doombuggy]

I have a fiscal year plan that I discovered made their 2010 PY (which ended on 6/30/11) safe harbor match deposit on 5/16/12. Our records indicate this PA files as a corp and they are also on a fiscal year.

We were having a discussion as to when the SHM deposit needs to be made. I thought it was required to be made by the end of the following plan year (6/30/12 in this case) but to be eligible to be deducted it needed to be deposited by the time the corporate tax return was due, including extenions.

The company currently has a sole owner; the partnership was disolved in December and he's taking on a new partner next week apparently. I am reconciling the plan's assets a little early since the owner is asking for a loan and I noticed this deposit.

If the deposit is considered late, what is the correction? Thanks for your thoughts!

[doombuggy]

OK, I see in Chapert 11 of the EOB (2009 edition) that I was correct about the due date deadlines. I am going to confirm with the client that their corporate is also 6/30 fiscal year end and that he is filing as a corp. I had one of my other 6/30 fiscals trigger a prohibited transaction but he files as a sole prop on a claendar year basis, so the 5330 we filed was not late (filed recently instead of by 1/31 like I thought it needed to be).

Still looking for any correction thougths, assuming that the corp is on a 6/30 fiscal....

[K2retire]

Isn't the correction that he has to deduct it in the year he deposited it instead of the year for which it accrued?

[BG5150]

I agree w/ K2. For PLAN purposes, it has to be done by the end of the next plan year. For the company's TAX purposes, it has to be done by the time they file their tax return. If the deposit is made after the tax deadline, it is deductible in the year it was made.

However, I think you may want to check 415. The firm has 30 days after the taxes are due to deposit the funds so that the amounts count toward 415 for the previous year. If made after that 45 day period, it counts in current year. (Treas. Reg. §1.415©-1(b)(6)(i)(B))

[Tom Poje]

even at one of the ASPPA Conferences the IRS admited it's unclear about the 415. Not sure what number this one was.

Contributions made after the Section 415 timing date of 30 days after the tax return due date are considered to be annual additions for the following year. However, if consider the contribution a self-correction under EPCRS, it is permissible to relate this back to the earlier year. If the contribution is made after 12/31, you are clearly under EPCRS. [One of the exceptions to the 415 timing rule is an erroneous failure to allocate. See Treas. Reg. 1.415©-1(b)(6)(ii)(A).

EPCRS clearly treats post-415-period deposits that relate back to a prior plan year as an annual addition for the year to which it is meant to be paid, but EPCRS applies only after the 12/31/09 deadline. Therefore, there is a lack of guidance for the period between 30 days after the tax return due date and the end of the 12-month regulatory correction period.]

2010 ASPPA Q and A

under EPCRS if you are 1 year late, then its a corrective contribution and the 415 rule doesn't apply as a 'current year'

sort of like saying, well you missed the deadline, plus the 30 days afterwards, now you are better to wait a few more months an be 1 year late. that makes no sense.

plus, what if you have an employee who terminated, and thus has no comp in the 'current' year but is owed the safe harbor. how does the 415 limit rule apply? are you forced to wait until the 1 year passes on this person alone and then put the contribution in?

[ETA Consulting LLC]

This is a little off topic, but the deposit deadline for 415 appears to target one set of events while inadvertantly impacting others. When you determine why such a rule would exist, it could only be for purposes of preventing employers who make "windfall profits" during any given year from making tax deductible contributions based on prior years for which smaller profits were made. It basically draws a line in the sand. The IRS should issue new regulations expanding the types of contributions that aren't impacted by the rule. The "erroneous failure to allocate" provision appears to pre-date the safe harbors, so they should be updated to reflect more modern designs.

May be a good recommedation for someone on the ASPPA GAC to push. It totally undermines everything ERISA when this provision gets interpreted in a way to preclude someone from receiving their safe harbor contribuiton because the terminated during the year (making the 415 limit in the following year zero due to no compensation)