431(c)(8) - Contributions made after plan year end

[AndyH]

What is the IRS position on contributions made after 2 1/2 months following plan year end in the case where a funding deficiency would occur if only 2 1/2 months of contributions were credited?

DOL doesn't like it, is that correct?

Even the MB instructions remain ambiguous on this issue:

"Line 3. Contributions Made to Plan. Show all employer

and employee contributions for the plan year. Include

employer contributions made not later than 2½ months (or

the later date allowed under Code section 431©(8) and

ERISA section 304©(8)) after the end of the plan year."

[Effen]

I think there was a Grey Book question about this 5-10 years ago, but unfortunately I can't access my old Grey Books.

I believe the IRS said that contributions must be attributed to a specific year and unless you could prove the contributions allocated after 2.5 months were attributed to hours worked in the prior plan year, they should not be counted. It used to be fairly common to count contributions after the 2.5 months, but I think everyone acknowledges that it is not proper and the practice has generally stopped.

If you count the contributions will you avoid the deficiency long term, or are you just kicking the can down the road one more year? If you are only saving one year, why fight the battle?

[AndyH]

The plan will have a deficiency if the contributions are limited to 2.5 months. It may have a deficiency even adding amounts up to 8.5 months, but not sure of that yet.

I could not find a Gray Book question on this issue. Or anything else particularly useful.

I agree with you that it be wise to count contributions only up to 2.5 months if it did not create a deficiency, but it does.