Can the annual 401(k) match be paid say June 30 in the year following the plan year?

[Cardscrazy]

Hello, I typically do the annual match calculation and lump sum contribution for my company in late January in the year following the plan year, but the company has a lot of expenditures in Q1.  They have asked if the match could be paid later in the year like, for example June 30.  I offered April 1, but they declined that date as it's too close to Q1.  They countered with April 30 or later, like June 30.  I believe a match paid after April 15 would mess up compliance testing, am I right?  Especially 415 testing, which is an issue for my company as we do after-tax voluntary contributions/Roth conversions.  I will offer to do quarterly matches with a last day of the quarter requirement.  Right now we have a last day of the year rule.  By going quarterly it will increase costs, but spread out the payments like they want.  What does the community think?  Is a match payment after April 15 not a feasible idea?  Besides 415 testing, what other tests are impacted so I can defend my position?  Thank you!

[Bri]

When is the sponsor's tax return due, and will they go on extension?  That will determine a lot of the answers.

[Lou S.]

Assuming calendar year plan and taxpayer if they go on extension to file taxes they might be able to make the match as late as October 15th, though that might be cutting it close.

[Cardscrazy]

sorry, and thank you.  Yes this is a calendar year plan year with it's federal tax return extended to October 15.  It's the testing that bothers me.  Our TPA said that any contribution made late would require another round of testing.  I'm going to offer the company payday matching, eliminating the last day rule, or quarterly matching with last day of quarter requirement.  I don't believe paying late in the year, even if allowed, is really a good option.  Thank you for your responses!

[Lou S.]

Sounds like a TPA limitation and not a Plan or Code limitation.

[Bird]

On 2/24/2023 at 1:50 PM, Cardscrazy said:

sorry, and thank you.  Yes this is a calendar year plan year with it's federal tax return extended to October 15.  It's the testing that bothers me.  Our TPA said that any contribution made late would require another round of testing.  I'm going to offer the company payday matching, eliminating the last day rule, or quarterly matching with last day of quarter requirement.  I don't believe paying late in the year, even if allowed, is really a good option.  Thank you for your responses!

I think you need to push back and clarify what they mean by "late." If you are on extension to Oct 15, then completing the contribution by that date is not "late" for...anything. I'm guessing they didn't realize you were going on extension or else just didn't spend any time thinking about the answer.

[R Griffith]

And the contribution does not have to be made before the testing can occur.  You can test the contributions, and then fund them later.  I am thinking they want the contributions posted before they do the testing - that is not required.

[MWeddell]

Make sure the plan document does not impose an earlier deadline, especially if the document is custom-drafted.