Timing of Discretionary match

[bzorc]

A plan subject to audit makes a discretionary match on an annual basis; however, they do not make the payment until the end of the year, so it is deducted on a cash basis on the company financial statements. The auditor, for the 2016 audit, is asking to see a calculation of the annual discretionary match, but the sponsor says that it will not be determined until sometime in November, and thus the 2016 match will be deducted on the 2017 corporate return. The auditor does not want to release the financials without a determination of the match for 2016. If the determination is in November, the October 16 deadline for filing the Form 5500 will be missed.

What are the ramifications here? Thanks for any replies.......

 

[CuseFan]

Why does the match have to be determined so late? Timing of determination (calculation?) vs. timing of deposit (and deduction) are two different things. Auditors are correct in wanting to book as an accrual on 2016 F/S because it's based on 2016 deferral activity. If the plan sponsor is not determining - i.e., deciding on if and how much the match for 2016 will be until November 2017, then I think there is an issue with it being a 2016 contribution (based on 2016 deferrals) at all. I think the discretionary match must at least be declared well before then.

[Belgarath]

For 415 purposes, November would be more than 30 days following the 404(a)(6) deadline, so the match would be a 2017 contribution for such purposes. Probably not an issue, but something they should be aware of. Agree with Cuse - it does seem odd that it would be determined so late, but I'm in no position to offer any opinion as to why this might be desirable from the employer viewpoint. There's probably some good reason for it - maybe they have to wait until tax returns completed (extended due date) then have a board meeting or something, etc., etc...