Can You Defer NOW for 2012?

[Guest Jay345]

Hello all,

I have a client who would like to open up payroll and make a bonus for 2012. Then he'd defer most of that bonus as a 2012 401(k) contribution. This doesn't sound correct to me, but I'm having a hard time finding something that spells it out. Any pointers out there?

Thanks!

[Guest LLHarlow]

He/she can do this until 3/15 if the plan document permits or simpy refers to 402(g) for annual limits. The bonus must be attributable to services performed in 2012 and must be paid within the first 2 1/2 months of 2013. I am working on this exact issue but I'm trying to determine how to report the 2012 deferral on my 2013 Form W-2. The W-2 instructions aren't clear on this so I'm leaning toward using the USERRA make up contribution reporting instructions. If you need citations, email me directly at lharlow@burkecpa.com.

[mming]

Also, I believe if the compensation that can be considered for plan purposes is SE income, it's valid to do so since finalized totals usually cannot be determined until after the close of the year making deferrals allowable right up until the filing deadline (the deadline if SE income is involved would be 4/15).

[Guest Jay345]

Thank you, both.

[BG5150]

Also, I believe if the compensation that can be considered for plan purposes is SE income, it's valid to do so since finalized totals usually cannot be determined until after the close of the year making deferrals allowable right up until the filing deadline (the deadline if SE income is involved would be 4/15).

However, the decision to defer must be made by the end of the year in consideration. So, you'd better find that election from the SE individual stating he or she wants to defer $x or y% dated before PYE.

[rcline46]

I am still in the dark as to how you can take W-2 income from 2013 and make a 2012 deferral for an active employee. From th OP this is not an SE emplooyee or income. Accounting wise, the bonus can be accrued for the corporate return, but plan wise I am not aware of anything that lets you do this. If there is I would love to be proven wrong with a cite to the regulation permitting this.

[QDROphile]

Treas. Reg. section 1.401(k)-2(a)(4). No comment on its use or if it is too late to amend the plan plan to make use of it for 2012.

[BG5150]

Treas. Reg. section 1.401(k)-2(a)(4). No comment on its use or if it is too late to amend the plan plan to make use of it for 2012.

I think this is the salient point:

(2) Is attributable to services performed

by the employee in the year

and, but for the employee’s election to

defer, would have been received by the

employee within 21⁄2 months after the

close of the year, but only if the plan

provides for elective contributions that

relate to compensation that would

have been received after the close of a

year to be allocated to such prior year

rather than the year in which the compensation

would have been received.

[rcline46]

I can hear the auditor now - 'the pay and deferrals you used for year x are higher than the W-2 and in year x+1 lower than the W-2. Please explain"

Or

Who is going to remember next year to reduce the deferrals and compensation by the add back? (sort of like the 'last few weeks rule')

And as mentioned earlier - is the election in place and signed by the actual plan year end?