True up contribution

Hi, 

Plan is terminating and the termination date is 07/31/2025.  The Plan sponsor wants to do a annual employer match true -up contribution which usually occurs in Jan for the pervious year.  They calculate the match throughout the year on a pay-check-by paycheck basis.

1) Since the plan is terminating I believe they should calculate and contribute to the plan for the period Jan 01-July 31 it will be for a short plan year correct? 

2) Should they wait until next year to do the contribution or can they do the calculation now and contribute? 

Very likely there is would be no issue doing the true-up through the termination date.  If the original plan document language somehow was overly descriptive and explicitly prescribed the true-up calculation, for example, by referring December 31, then the easy fix is to use the plan termination amendment to specify a true-up as of the termination date.  They may want to do this anyway since it is very simple to do.

They will not want to wait until next year in any event since the plan will not be considered completely terminated until all of the benefits are distributed and the assets to to zero.  If they paid out everyone shortly after the termination date and then made a contribution next year, the plan would need to file 5500 for next year (assuming a calendar year plan).

Keep it simple.

Yes, if 7/31 is the termination date you would calculate your contributions for 1/1-7/31 and also test that period if needed. Technically, not a short plan year, at least for filing purposes, as the plan is still in existence until assets are distributed. The timing of deposit will depend on what the plan requires, if anything specific, and the employer's tax year/return due date. If the employer continues on and only the plan is terminating, then deposit could possibly not be due until next year.