New Plan to me -> Business has Fiscal Year, Plan has Calendar Year

I have never run into this situation where the business has a June FYE and the plan has a calendar PYE.  Is this common? Allowed?   A nightmare to administer?

Thoughts? recommendations? 

Thanks

Common:  no

Allowed:  yes

Nightmare:  I think so

Thoughts:  make sure you price this one correctly and understand which limits and comp... you use

Recommendations:  Talk to the client and find out why they set it up this way.  I once had a client that had done this because back in the '70s when it was all set up their payroll system really couldn't get comp and hours for any period than what the W-2s were done.  But now they have a system that could do it and the longer we talked about it they sync the two up.  

Have fund. 

Many charities and other tax-exempt organizations have an accounting year meant to measure a program year, and a year ended June 30 is a common choice.

Some profit-seeking businesses have seasonal or business-cycle reasons to use an accounting year with an end other than December.

In my experience, it’s often simpler to administer an individual-account (defined-contribution) retirement plan with a calendar plan year, rather than a plan sponsor’s or participating employer’s accounting year.

But much depends on the plan’s provisions.

And on how strong or weak is the employer’s need or interest in measuring an accrual for a nonelective or matching contribution on the employer’s accounting year.

If there’s a reason to revisit a selection of either the employer’s accounting year or the plan’s accounting year or other plan year, consider involving both sets of decision-makers, including each’s lawyers and accountants.

Thanks!  I have a few FYE plans left from back in the good old days and understand what IRS limits to use when performing contribution calculations.  This plan is a farmer which is maybe why they have a business FYE.  Since this is a new plan to me, maybe this might be a good time to align the plan to the business' FYE to keep them both in sync?  Do the Dec 31, 2024 year then move to a June 30, 2025 PYE with a short year admin?  Make sense?

A calendar year plan can be operated using standard procedures consistent with IRS reporting, compliance testing (e.g., ADP/ACP), Form 5500 filings, and participant disclosures, all of which are designed around calendar-year rules. There’s no additional complexity in plan administration just because the employer’s fiscal tax year differs.

The primary consideration in this arrangement involves the timing of employer contributions, particularly when deducting contributions on the employer’s fiscal-year corporate tax return.

Switching the plan to an off-calendar year creates more administrative headaches in my opinion.  

If this is a 401k-plan, maybe the PY is affected by the 402(g) limit's effective date?