Simple IRA Late Employee Contribution

[Kally]

Employer sent employee’s last 2017 Simple IRA contribution to financial institution but it was never received. The book keeper realized it (2 months later), but was told by the financial institution that they could not accept the employee’s payment for 2017 any longer. The book keeper called the IRS but could not find anyone to answer how to fix this issue. The IRS Simple IRA fix it guide states to “Make corrective contributions for each employee equal to the missed earnings for the period the deposits were late.” However, if the missed payment is sent in, it will be applied to the following year. How will this affect the employee? His W2 states the full amount of his contribution, but the financial institution will not include the late payment for 2017. Instead, they said it will be applied to 2018. Are they correct? How should this issue be corrected? Thank you in advance for your reply. 

[Bird]

The institution is not correct; it's not their job to police timing of contributions.  Whether it's worth arguing with them over it is a different matter, because the year they associate with the deposits is just a number on a piece of paper - it doesn't mean anything* except it makes it easier to check totals each year.

*I think...to be honest I don't know if they are required to do some kind of reporting; if so then that would actually explain why they can't code it properly.  But I wouldn't think any reporting would be due until 2/28 so it shouldn't be too late.

In any event, I might try calling them one more time (different person answering the phone/different answer) but wouldn't worry about it too much; just document it thoroughly in case it comes up later.

[Kally]

Thank you fir your reply, Bird. Unfirtunately, the financial institution refuses to apply it to 2017. I’ve called the IRS many times and no one can tell me how to fix this issue.  I need help and don’t know what to do!

[Bird]

... wouldn't worry about it too much; just document it thoroughly in case it comes up later.  (Send it in and let the institution code it as 2018 if they insist.)

[spiritrider]

I think there might be a misunderstanding, maybe even on your end. A SIMPLE IRA like a SEP IRA custodian does not care what year a contribution is for only what year it is made. This is not any different than the last pay period of the year where the contribution is not made until January.

From the IRS 2017 Instructions for Forms 1099-R and 5498, Specific Instructions for Form 5498, page 22.

Box 9. SIMPLE Contributions Enter employer contributions, including deferrals, made to a SIMPLE IRA during 2017, including contributions made in 2017 for 2016, but not including contributions made in 2018 for 2017. Trustees and issuers are not responsible for reporting the year for which SIMPLE contributions are made. Do not include contributions to a SIMPLE 401(k) plan.

This contribution made in 2018 is properly reported on the 2018 5498 by 05/31/19