Match not funded on Pay-period basis

[Vlad401k]

We have a participant who didn't receive a matching contribution for three contributions at the end of last year, whereas he should have. The document states that the payments of matching contributions should be made on pay-period basis. What is the best way to correct this situation?

 

Of course, the company will fund the matching contribution, but what's the best way to go about lost earnings? Should the 15% penalty be calculated on lost earnings? What about Form 5330?

 

Thanks in advance.

[rcline46]

What 5330 and what 15%?  Those apply to missed deferrals, not matching contributions.  If they were Safe Harbor match then they need to be in by June 30th I think.

[Vlad401k]

Thanks. Would the lost earnings have to be calculated at all?

 

I can see it being argued two ways:

 

1) The match was still funded within the company's tax filing deadline, so there the contribution was not late.

 

2) The document states that the contributions are done on pay period by pay period basis and therefore the contribution was late.

 

What would you say is the best way to handle this situation?

[K2retire]

The document likely says the match is to be CALCULATED on a pay period by pay period basis. That doesn't necessarily require that it be deposited every pay period.

 

However, if all the other employees got their match sooner, you could have a discrimination issue. For that reason, lost earnings might be appropriate. 

[Kevin C]

If the SH match is calculated separately for each payroll period, the deposit is due by the end of the next plan year quarter. 1.401(k)-3(c)(5)(ii).  Although, as mentioned, there could be discrimination issues with depositing later for some than for others.