Cutoff for receivable

[Ehill]

Question... In recording a plan receivable for a 09/30 plan, do you use payroll period ending or paydate as cut off for plan receivable? I,e. We have a payroll period ending 9/25 but paid to employees (withheld) 10/2. Would that be considered receivable at 9/30 because the period ended within the plan year or not considered receivable since it wasn't withheld until 10/2?

I see on 5500 Schedule H instructions that receivable is based on withheld but is that the same for GAAP purposes?

Thanks so much!!

E.

[chc93]

In the few cases I've seen, the company tells us what the payroll periods are for their tax year and what is reported on the W-2. And that's what we use. I think being consistent is what matters.

[ETA Consulting LLC]

Yes, it would be receivable since it was actually deferred by 9/30 but not actually deposited by then. This is actually consistent with what chc93 stated.

Good Luck!

[Mike Preston]

ETA, are you sure? I'm of the firm belief that nothing can be deferred earlier than the date that the wages would have been paid absent a 401(k) plan. Even though I think of that as the default I recognize that the regs authorize the inclusion in the prior year of that which is paid/payable in the first few days after the end of the period. So I agree that consistency is important. I'm just saying the default is that there is no inclusion in the prior year unless there is a conscious decision to do something which is not standard.

[Bill Presson]

We've always recommended that our clients use check date. We would not show a 10/2 check date as a receivable for a 9/30 year end.

If you try to use accrued compensation, I think you are not only going to need to include the compensation through the pay date of 9/25, but also the additional 5 days through 9/30.

In 30+ years, I've never had the IRS, DOL or a CPA plan auditor have an issue with this.

[hr for me]

agree with Bill. We always went by check date. And that is also how W-2 compensation works. If a check is paid in the current year, it goes on the current W-2 even if the first pay period was for some days within the prior year.

In all the processing I did on 401k plans, we always used check date and had no idea on what the actual pay period ending date was. That was not a piece of data that any client provided to us.

I do agree that you should be consistent over time.

[ETA Consulting LLC]

ETA, are you sure? I'm of the firm belief that nothing can be deferred earlier than the date that the wages would have been paid absent a 401(k) plan. Even though I think of that as the default I recognize that the regs authorize the inclusion in the prior year of that which is paid/payable in the first few days after the end of the period. So I agree that consistency is important. I'm just saying the default is that there is no inclusion in the prior year unless there is a conscious decision to do something which is not standard.

I got the fact pattern mixed up. I was reading that the payroll date was 9/25 and the funds were withheld at that time. It's my bad, but 99% of the effort in answering questions is actually determining the fact pattern; and I failed miserably! :-(

[hr for me]

It's okay ETA...we all do that at some point or another