Receivable Contributions

[RetirementRosie]

Quick question: We reconcile our plans on an accrual basis for Form 5500 SF reporting. Because of this we end up with receivable contributions from one year to another, typically due to pending payrolls. We have had a question come up because of this. Our sponsors will mark a payroll file (for example) as the payroll period 12/01/15 to 12/31/15, with a pay date of 01/15/16. The payroll is then processed when given to us, say 01/16/16. Would you mark this payroll as a receivable contribution for 2015 because of the pay period OR would you leave it off of the 2015 plan year because of the actual pay date to ppts of 01/15/16? Advice is appreciated, thanks!

[ESOP Guy]

Back in my 4k days I always would have treated that as a 2016 contribution so the 4k plan and the W-2s match.

To me an accrued 2015 contribution is more like a match of PS cont that is allocated as of 12/31/2015 but paid in 2016

I would add we would have always put that on the 2016 ADP test also.  .  When it came to 4k deferrals we always matched how the employees W-2 would have looked like. 

I would add if you make that a 2015 contribution do you make the comp it was deferred from 2015 also?  Even though it is clear the W-2 would make it 2016 comp?  How do you make the comp/def year for ADP or 415 testing work if 4k def is in 2015 and comp is in 2016?   That is why we always made the W-2 and 4k def match in terms of year. 

[hr for me]

agreed that it would be 2016 -- since the pay date is 16. An accrual would be more like pay period 12/10-12/24 paid on 12/26 and processed on 12/28 at the recordkeeper and deposited on 1/2 due to holidays/weekends, etc.  Something that is in the 2015 year on paycheck date but the deposit doesn't hit the bank until the next year.  When we did quarterlies, there were accruals pretty much every quarter and they tended to roll one payroll from prior quarter in and one payroll from current quarter not yet in the trust.

Yours was paid in 2016 and deposited in 2016. I don't see where it would ever be a 2015 accrual just because some or all of the pay period itself is in 2015....it goes by paydate.

 

[CuseFan]

Yes it's 2016 pay, although there was a day (very early in my career!) when accrued compensation was able to be included for the year earned rather than the subsequent year paid, for those of us old enough to remember.

[RatherBeGolfing]

13 minutes ago, CuseFan said:

Yes it's 2016 pay, although there was a day (very early in my career!) when accrued compensation was able to be included for the year earned rather than the subsequent year paid, for those of us old enough to remember.

I agree, this would generally be considered 2016 pay and contributions.

That said, it is still possible for a plan document to include "post year end compensation" in the definition of comp.  In my document (if elected), Post Year End Compensation means amounts not paid during the year earned solely because of the timing of pay periods and pay dates provided these amounts are (a) paid during the first few weeks of the next year and (b) included in Compensation.

 

[CuseFan]

True - but does anybody do that? Seems like it would be administrative nightmare.

[Mike Preston]

I've had one client do it that way.  They knew what they were doing and did it consistently, across years.  Most clients wouldn't be able to.