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Safe harbor ADP Contribution not made until December of following year or later...415?


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401k plan with ADP Basic SHM provision is amended for 2022 changing to a Triple Stack Match.   When the SHM was calculated, the amendment was missed, so only the 1st tier (4% of comp) was calculated and timely deposited.  The correction is going to be made this week for the other required tier, but obviously will be deposited after the deadline for 2022 415 purposes.  EPCRS Revenue Procedure 2021-30 provides at Section 6 .02 (04)(b) A corrective allocation to a participant's account because of a failure to make a required allocation in a prior limitation year is not considered an annual addition with respect to the participant for the limitation year in which the correction is made, but is considered an annual addition for the limitation year to which the corrective allocation relates. However, the normal rules of § 404, regarding deductions, apply.

Can the Plan rely on this provision when making the deposit for the 2022 plan year before 12/31/2023, or is that provision only going to apply if the correction is made 1/1/2024 or later since "technically", there isn't an EPCRS correction needed until 1/1/2024?

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There is sort of a perverse incentive here to not correct timely. If you wait until 2024 to make the contributions, then you will have an operational failure (since the safe harbor contributions were not made in time), and then you could correct under EPCRS and count them as 2022 annual additions.

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.

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