Safe Harbor Match but no 401k deferred

[Becky Schwing]

I have a partnership.  For 2018 the partners were going to defer $18,000 in 2019 for the 2018 plan year.  The plan is a safe harbor basic match.  I provided them the safe harbor match amount based on the $18,000 each they were supposed to deposit.  The problem is they had some changes to their accounting group and they forgot to deposit the 401k deferrals even though they did fund the safe harbor match.  The match was like $14,000.  

What are the possible corrective options for this?  Can they forfeit the match and use it to offset their 2019 match?  Or do they have to allocate that ineligible match as a profit sharing contribution for 2018?  Any other ideas?  It was just an oversight on the part of the accounting group.

 

[Bill Presson]

If they made the election, then the issue is the deposit and it should be corrected immediately. I don't see this as being different than a w-2 employee making an election and it not being deposited.

[Becky Schwing]

So you think they should just make the $18,000 deposit into the plan - for 2018 since they have a written election?  It does not matter all that much that it is late?

[RatherBeGolfing]

36 minutes ago, Becky Schwing said:

just make the $18,000 deposit into the plan

 

36 minutes ago, Becky Schwing said:

It does not matter all that much that it is late?

It matters.  But if they deferred the comp, you really don't have an option to not make the contribution.  You need to correct now by making the deposit, calculating and contributing lost earnings, paying the associated excise taxes, filing VFCP, and possibly amending prior year Form 5500s.  As Bill said above, it is really not different from an employee deferring from W-2 comp without the contribution being made to the plan.