PS plan - excess contributions made during the plan year

[Jakyasar]

Hi

I never had to deal with the following situation - takeover case:

One lifer ps plan. Makes over 280k in w-2.

Client makes max PS contribution  for 2018 and deposited 10k extra during 2018 and paid the excise penalty.

Did the same for 2019 (same as 2019) and now trying find a way not to pay the penalty but going to have to, I do not see any way out of it, am I wrong?

Question(s):

10k deposited from 2018, does it apply towards 2019 limit or just becomes an asset of the plan?

10k deposited from 2019, does it apply towards 2020 limit or just becomes an asset of the plan?

There is no mistake of fact here.

Thank you,

[Larry Starr]

1 hour ago, Jakyasar said:

Hi

I never had to deal with the following situation - takeover case:

One lifer ps plan. Makes over 280k in w-2.

Client makes max PS contribution  for 2018 and deposited 10k extra during 2018 and paid the excise penalty.

Did the same for 2019 (same as 2019) and now trying find a way not to pay the penalty but going to have to, I do not see any way out of it, am I wrong?

Question(s):

10k deposited from 2018, does it apply towards 2019 limit or just becomes an asset of the plan?

10k deposited from 2019, does it apply towards 2020 limit or just becomes an asset of the plan?

There is no mistake of fact here.

Thank you,

The first $10k is part  of the 2019 allocation; which means that now $20k is carried forward as 415 suspense account into 2020.

[Jakyasar]

Thank you for the response, will advise them not to do anything for 2020 until they talk to me first and will also have them deposit 20k less.

To confirm, these is no way out of the excise tax for 2019, correct?

[Larry Starr]

17 hours ago, Jakyasar said:

Thank you for the response, will advise them not to do anything for 2020 until they talk to me first and will also have them deposit 20k less.

To confirm, these is no way out of the excise tax for 2019, correct?

Yes, that is my conclusion as well.

[Mike Preston]

Yet another problem caused by depositing contributions berfore the end  of the year.  The TPA has a chance to recover from an extra 10k deposited after the end of the year.  Even if done two years in a row. Is there a broker whispering in the client's ear?

[ombskid]

Similar situation but ps and cash balance plans. Put 4000 too much into ps plan during 2019. Can that be transferred to CB plan now as part of the cb 2019 contribution?

[Jakyasar]

In response to Mr. Preston's comment. I was told that the client did it without consulting with anyone and as far as I know did not have a TPA either (the document possibly done thru a broker). Their CPA did not find this out till last week. I am guessing slipped thru the cracks bcz they did not have to file any 5500 forms. Hopefully will put things in order once I take it over.

Be safe.

[Larry Starr]

4 hours ago, ombskid said:

Similar situation but ps and cash balance plans. Put 4000 too much into ps plan during 2019. Can that be transferred to CB plan now as part of the cb 2019 contribution?

Generally, no.  That doesn't mean it doesn't happen: "Oops! The office manager put the wrong account on the deposit slip so we are just correcting the administrative error".  I've seen this a number of times; the argument is that the money is NOT coming back to the employer in any way and is still being used and deducted in the same year.  Is it right?  Maybe, or maybe not. But I guarantee is it done and I've NEVER seen any repurcussions.

 

[ombskid]

Thanks. That's pretty much what I thought.