Discretionary Profit Sharing Contribution - Resolution

[MarZDoates]

Does a board resolution need to be adopted to declare the amount/percentage of p/s contribution the plan sponsor will make for the year? (IF they make one?) I have heard "yes" and I have heard "no".

[QDROphile]

The question is answered by plan terms and corporate governance considerations. The answer may be different from plan to plan.

[MarZDoates]

Ahhh, yes. That wonderful answer. "It depends". Thank you muchly!

[david rigby]

I suggest the answer is almost always Yes.

If a contribution is discretionary, it is usually the governing authority (ie, the Board) that has the responsibility/authority to exercise that discretion.

[QDROphile]

The "Yes" answer is safe if the plan sponsor prefers to be told what to do (prototype documents) rather than decide how it wants to conduct itself. If the sponsor does not like the answer, there are alternatives that can be implemented without changing the plan documents.

[Bird]

The technical answer is probably yes, for a corporation - it needs to have some authority/approval to take actions. My accountant tells me to put the amount of my PS contribution in a year-end resolution, and I do, with catch-all language that whatever actions were taken during the year are deemed to be approved, or something like that.

But on a practical level, I don't remember the IRS ever asking to see such a resolution. It might be one of those things where it's only a problem if someone wants to challenge it, and that's probably never going to be an issue.

[BG5150]

I think this would be more of a company by-laws issue than a plan qualification issue.