Employer Cannot Fund SH Match

[Dougsbpc]

Suppose an employer cannot fund the 2013 safe harbor match by September 15, 2014?

What happens?

I would think they would need to run the ADP and ACP tests and provide a top heavy minimum since the plan is top heavy. Any other horrible consequences?

[Jim Chad]

Can he correct under EPCRS by funding before 12-31-14?

[Tom Poje]

no no no. ouch, the scars still hurt from having had this beaten into me a number of times, I would point out the following.

1. your document says the plan is safe harbor. therefore, failure to fund the safe harbor is a failure to follow the terms of the document. so the plan is still safe harbor, not top heavy. failure to follow the terms of the document is a possible cause for plan disqualification, but that is the purpose of EPCRS.

2. 1.401(k)-3(h)(1) .......safe harbor contributions must be made within 12 months of the end of the plan year. [just like any other QNEC or QMAC.]

so there isn't a Sept 15 deadline, there is a 12-31 deadline.

now, at one of the ASPPA conferences the issue was raised about how this effects the 415 limit (annual additions)

normally you have up to 30 days after the deadline, so 10/15 for a calendar year plan. if contributions are made real late (after 12/31 they are corrective contributions under EPCRS and count as an annual addition for the year they were required.

but what of contributions made between 10/15 and 12/31? That's right. it makes no sense. you make them timely for purposes of satisfying the safe harbor, you actually avoided getting into EPCRS, why should the annual additions apply to the year made rather than the year required. even the IRS admits this may be issue. (On the other hand it doesn't sound like you will be running into a 415 issue either year, so it probably doesn't matter in this case.)

[Dougsbpc]

It is interesting. They have enough forfeitures to make the safe harbor match contribution. The document indicates that forfeitures shall be used to reduce employer contributions. It is very unfortunate that apparently forfeitures cannot be used to fund safe harbor contributions.

[rcline46]

That rule is in the PPA docs. If current doc is silent on what employer contributions the forfeitures can be used for, use them for the Safe Harbor.

[BG5150]

Also, make sure you check the SH Match basis. Is it payroll based or annual? If it is payroll based, then the SH Match is due by the end of the quarter following the basis period. (Many propel forget that little SH nugget.)

[My 2 cents]

Also, make sure you check the SH Match basis. Is it payroll based or annual? If it is payroll based, then the SH Match is due by the end of the quarter following the basis period. (Many propel forget that little SH nugget.)

By "propel", did you mean to say "people" before that rogue spellchecker got ahold of it?

[John Feldt ERPA CPC QPA]

It is interesting. They have enough forfeitures to make the safe harbor match contribution. The document indicates that forfeitures shall be used to reduce employer contributions. It is very unfortunate that apparently forfeitures cannot be used to fund safe harbor contributions.

If your document says forfeitures can be used this way, then rely on that document's opinion letter or its advidory letter and the employer can use those forfeitures to fund the safe harbor. If the plan says they "shall", then you must use them as the documentr indicates.

[BG5150]

By "propel", did you mean to say "people" before that rogue spellchecker got ahold of it?

Indeed.