Late Discretionary Matching Contribution

[ratherbereading]

I have an audit plan and they made 1 late discretionary matching deposit in 2016. It was 2 weeks late due to a glitch in their payroll system.  Their plan document was amended to allow matching contribution, made on an a payroll basis,  as of 2/1/2016. All their 401k deposits are fine. CPA wants them to go through SCP or VCP in case the plan ever gets audited. And he wants us to submit a letter stating that this is not an operational failure in case they get audited in years to come.  I'm thinking neither is necessary. Is this an operational failure?

Thanks in advance!

[bzorc]

Employer contributions technically do not need to be until the due date of the business return, including extension. Therefore, I don't think you have a late remittance issue here, and you do not have an operational failure.

[RatherBeGolfing]

Just curious, does the plan actually say deposited on a payroll basis, or allocated on a payroll basis?

[ratherbereading]

The document says "The computation period is on a payroll basis." I think they are fine.

[401_noob]

When was the match deposited because I thought that if a match is allocated on a pay period basis then it has to be deposited by the end of the following quarter?

 

 

[401_noob]

2 hours ago, 401_noob said:

When was the match deposited because I thought that if a match is allocated on a pay period basis then it has to be deposited by the end of the following quarter?

Maybe that is just for SH Matching contributions now that I think about it... but if it is good enough for a SH match, why wouldn't it be good enough for a discretionary match?

[Luke Bailey]

"On a payroll basis" is really loose. I would argue that all that means is that if the person contributed and was there for that payroll period, they get the match. There is nothing in the language that says precisely when or requires deposit on a payroll basis. The requirement to deposit by end of next quarter is just for safe harbor. 1.401(k)-3(c)(5)(ii). You're fine.

[Tom Poje]

as noted above, it would seem odd that a discretionary match would be considered late (in your case, "two weeks late") while a required safe harbor match has until the end of the following quarter. or put another way, how come the IRS did not require safe harbor match to be put in the same time as the deferrals.

[TPAJake]

Another overzealous Auditor, not too surprising but there's no failure.  No way it's worth the expense of a VCP filing.