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132(j) Comp and Matching Contributions


srhall

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I've been researching what is considered a reasonable time for an employer to deposit a 401k contribution/match of an employee’s compensation and was wondering if there are there any exceptions/exemptions for 132(j) types compensation? Some situations I am looking at have 132(j) compensation that is hard to get a number on quickly as they are paid in advance and then, what is not used by the employee, is later refunded. Any guidance would be appreciated.  Thanks!

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Thoughts --

1. Unless your plan provides otherwise, there is no particular time limit for the deposit of matching contributions. You could deposit them after the close of the plan year, and not run afoul of the Internal Revenue Code or ERISA. There is only a problem if the plan document establishes a time limit.

2. The participant contribution rules that require the swift deposit of employee 401k  contributions only concern themselves with amounts that are actually withheld from pay. Given the restrictive DoL rules in this area, everything you withhold really needs to be deposited. Don't hold the money. You should make any required adjustments later.

3. Plan documents often use a loose definition of pay with respect to deferral elections to get around issues with amounts accrued but not actually paid. Is yours one of them?

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1 hour ago, Alonzo Church said:

Thoughts --

1. Unless your plan provides otherwise, there is no particular time limit for the deposit of matching contributions. You could deposit them after the close of the plan year, and not run afoul of the Internal Revenue Code or ERISA. There is only a problem if the plan document establishes a time limit.

 

Unless it is a Safe Harbor Match (SHM) calculated per pay period.  In that case, they must be deposited no later than the end of the calendar quarter after which the corespondinding deferrals were withheld.

For example, the SHM (that's calculated on a per-pay basis) on any and all deferrals withheld from April 1 to June 30 must be deposited no later than Sep 30.

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.

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