How to treat the last Payroll paid the following plan yearlan year treatment

[AdKu]

My client is on a semi-monthly payroll and the last payroll of 2016 was paid on 1/5/2017.

Each employees W-2s as well as the W-3 total for the 2016 didn't include the payroll contribution for the payroll period 12/16/2016 - 12/31/2016 that was paid on 1/5/2017.

How does the regulations require us to treat this last payroll that was paid the following year?

As part of the 2016 payroll or as part of the 2017 payroll?

If possible, please include the part of the regulation that go over the treatment of this type of payroll contributions.

Many thanks!

 

[ESOP Guy]

You don't need to read the regulations read the plan document.  I have not seen a document that doesn't define compensation in a way that doesn't relate to the tax code.  So the compensation is clearly 2017 compensation.  Then go read the part of the deferrals.  I am will to bet it tells you that you are deferring part of your compensation.  2017 comp makes  it 2017 deferral.  The guy who taught me this business told me 99% of all your answers are in the plan document and you rarely need to read the regulations.  I think this is one of those times.  The document will lead you to do thing on a cash basis not accrual. 

Sorry but you are over thinking this if you want to make this 2016 deferrals.  For one thing you could end up with a possible 415 and other problems that make it clear making these 2016 deferrals doesn't make sense.  What if this is the person's first check and you are allowed to enter and defer immediately?  You would have their income in 2017 since it is almost  certainly tied to W-2 wages in some way but the deferrals are in 2016.   So the person has Annual Additions in 2016 but no comp so it is a 415 failure. 

 

 

[RatherBeGolfing]

I agree with ESOP that your answer isn't in the regs its in the document.  That said, it isn't necessarily 2017 comp, and it isn't necessarily that complicated.  If the document allows for post year end comp to be included, it would be 2016 comp.  Read your document, it should be very simple to figure out whether it is 2017 comp (most likely) or 2016 comp for plan purposes.

[Tom Poje]

this could depend on how you have filled out your document.

for instance, the FT William document has the following option

 

15. Post Year End Compensation

[ ] Determine Compensation using Post Year End Compensation

NOTE: If selected, amounts earned during the current year and paid during the first few weeks of the next year will be included

in current year Compensation.

NOTE: A.15 will also apply for purposes of Statutory Compensation.

...........

corbels document had the following for the final 415 amendment language

3.3           Administrative delay ("the first few weeks") rule. 415 Compensation for a "Limitation Year" shall not include, unless otherwise elected in Section 2.1 of this Amendment, amounts earned but not paid during the "Limitation Year" solely because of the timing of pay periods and pay dates. However, if elected in Section 2.1 of this Amendment, 415 Compensation for a "Limitation Year" shall include amounts earned but not paid during the "Limitation Year" solely because of the timing of pay periods and pay dates, provided the amounts are paid during the first few weeks of the next "Limitation Year," the amounts are included on a uniform and consistent basis with respect to all similarly situated Participants, and no compensation is included in more than one "Limitation Year."

................................................

so I guess if you want you could take all the W-2s for everyone and increase them by a few weeks, but then you really should back off the first few from the prior year because you wouldn't want to count comp twice.  and do that every year. not sure that is worth all the trouble, but that is probably just me.

[ESOP Guy]

Now that I have read the other two replies I guess I have seen plan documents that give you the option to make that compensation part of the prior year but I don't think I have seen anyone do it for the reason's Tom says. 

 

[AdKu]

Thank you all!!!

[Mike Preston]

I've done it when doing 52-card pickup (a VCP application).