2 Partners only in LLC taxed as an S Corp.

[DDB BN]

Received a call from an Advisor.  He has a prospect with 2 Partners, no employees.  It is an LLC taxed as an S Corp and the 2 partners receive W-2 income.  The Advisor and CPA want to set up the plan for 2025 and have the partners make the maximum deferrals before year end from a bonus check.  The plan can be set up for 2025 but can they make the employee deferral contributions at this late date for the 2025 year?  I question it because they take W-2 comp and not Schedule C or K-1.

[John Feldt ERPA CPC QPA]

They can only defer from W-2 wages not yet paid. They can only defer from wages paid once the 401(k) plan document and trust agreement is executed (signed). They have to be eligible under the terms of the plan. A deferral election is also required.

Other than noting today’s date on the calendar, and the other 50 requests coming in today for a plan document to allow deferrals in 2025, that all sounds easy, right?

[DDB BN]

So they can set up the plan before year end and make deferral contributions from a year end bonus for 2025?

[Bri]

No issues there, it's not like they have to follow the rules for safe harbor plans' lengths.  Just make it a full plan year with deferrals effective 12/23 or whatever. 

But as John referenced, no document means no plan means no deferring out of order.

[DDB BN]

Thank you!

[Belgarath]

There was a time, in the days of old when knights were bold, (and with a prior employer) when we would receive a suspicious number of signed and dated resolutions and document signature pages at year end, and the rest of the document later on after the end of the year. Fortunately we don't see that these days.

[Peter Gulia]

Now that service providers use electronic-signature regimes, have plan sponsors invented new explanations about why a signature was not received before year-turn?

[RatherBeGolfing]

3 hours ago, Peter Gulia said:

Now that service providers use electronic-signature regimes, have plan sponsors invented new explanations about why a signature was not received before year-turn?

I may or may not have seen some of these manually signed documents due to "issues with electronic signature software" and other similar explanations.

 

[BG5150]

Is there time enough to get the investment accounts properly set up?  

[DDB BN]

We are working on the document now and should be signed by Friday the latest and the Advisor can set up the accounts within a day of the document being signed.  So it is a rush but appears that it can be done.

[rocknrolls2]

But has the bonus check been paid to the 2 owners? If the answer is yes, no deferral allowed.

[DDB BN]

No, the bonus check will be issued on 12/31