Owner 401(k) deferral deadline - quick question

[ratherbereading]

Small plan-professional corporation, 2 owners (husband and wife).  Everyone is paid via W2, including owners.  They just moved from a SDBA with individual accounts  to Nationwide.  The owners  typically deposit their 401k contribution out of one payroll check (max amount).  Their plan year is 10/31.  They are still trying to decide whether to defer for  PYE 10/31/2019.  They insist they have until their tax filing deadline.  Since they are not a partnership, and don't receive K1s, I believe their 401k contribution needs to be deposited by 10/31/19, or a couple of days after.  Yes? No?

[Lou S.]

Yes it needs to run through payroll and has the same deposit timing requirements as the other employees.

I assume  the thread title is a typo and refers to 401(k) deferral and not a $40K deferral.

[ratherbereading]

1 minute ago, Lou S. said:

Yes it needs to run through payroll and has the same deposit timing requirements as the other employees.

I assume  the thread title is a typo and refers to 401(k) deferral and not a $40K deferral.

Thanks Lou -- and thanks for picking up the typo-- yes, 401k deferral!

[Lou S.]

Just now, ratherbereading said:

Thanks Lou -- and thanks for picking up the typo-- yes, 401k deferral!

I often make typos like that. But they are two very different questions. Didn't want folks giving you advice on how to correct excess deferral if that wasn't the problem.

[ratherbereading]

2 minutes ago, Lou S. said:

I often make typos like that. But they are two very different questions. Didn't want folks giving you advice on how to correct excess deferral if that wasn't the problem.

I am trying to see if I can correct it but I don't see a way!

[jpod]

The relevance of the 10/31 plan year is not clear to me when talking about elective deferrals.  Care to elaborate?

[Lou S.]

29 minutes ago, jpod said:

The relevance of the 10/31 plan year is not clear to me when talking about elective deferrals.  Care to elaborate?

My guess in 10/31 is this Thursday, 2 days from now and if they want to defer the 402(g) limit in the year ending 10/31/2019 instead of the year ending 10/31/2020 there is some time pressure regarding payroll.

[Larry Starr]

58 minutes ago, ratherbereading said:

Small plan-professional corporation, 2 owners (husband and wife).  Everyone is paid via W2, including owners.  They just moved from a SDBA with individual accounts  to Nationwide.  The owners  typically deposit their 401k contribution out of one payroll check (max amount).  Their plan year is 10/31.  They are still trying to decide whether to defer for  PYE 10/31/2019.  They insist they have until their tax filing deadline.  Since they are not a partnership, and don't receive K1s, I believe their 401k contribution needs to be deposited by 10/31/19, or a couple of days after.  Yes? No?

I have no idea what an SDBA is, but I doubt I need to know.  "THEY" insist?  Really?  What kind of "professionals" are they.  Hopefully, they are not lawyers or accountants.  In any case, they should not be "insisting" on anything, they should be listening to their PROFESSIONAL advisors IN THIS BUSINESS.  

Of course they can't do what they say they can, and you already know that. Deferrals have to come out of a paycheck.  If it is not taken out of their paycheck by 10/31, then there is no deferral for the plan year ending 10/31/19 (assuming there were no deferrals in the period 11/1/18 - 12/31/18.

The problem is NOT when do the contributions need to be deposited (which you have correct), it is when do the contributions need to be taken out of their pay!  It could be taken out by 10/31 and NOT deposited until their extended tax deadline, but then they would have failure to make timely deposit problems, which is a separate issue.

[jpod]

19 minutes ago, Lou S. said:

My guess in 10/31 is this Thursday, 2 days from now and if they want to defer the 402(g) limit in the year ending 10/31/2019 instead of the year ending 10/31/2020 there is some time pressure regarding payroll.

Yeah, but why is that important?  If they defer after 10/31 but before 1/1/20 they will still get the tax benefit for 2019, so there must be some other reason (unless there's no reason).  

[jpod]

21 minutes ago, Larry Starr said:

I have no idea what an SDBA is, but I doubt I need to know.  

Probably Self-Directed Brokerage Account, as opposed to a platform with DIAs through Nationwide, but you're right we don't need to know as that would be of no relevance to the issue at hand

[Lou S.]

13 minutes ago, jpod said:

Yeah, but why is that important?  If they defer after 10/31 but before 1/1/20 they will still get the tax benefit for 2019, so there must be some other reason (unless there's no reason).  

Well which year it goes in the ADP test is one and if there is a match which year you get the deduction would be another. But yes for calendar year deferral limit it wouldn't matter much.

[JackS]

35 minutes ago, Larry Starr said:

I have no idea what an SDBA is -

 Self Directed Brokerage Account not really relevant to the Q but now you know.

 

[david rigby]

4 hours ago, ratherbereading said:

I am trying to see if I can correct it but I don't see a way!

Thread title fixed.

[ratherbereading]

10 hours ago, david rigby said:

Thread title fixed.

Thanks!