Owner only 401k plan - late deferrals

Owner only 401k plan.

Owner deducted 23k for 2025 on the w-2 but deposited just now.

What kind of correction is needed, if any?

If need to adjust, I am assuming DoL calculator cannot be used, correct?

What other means can be used?

Let's say the correction is $100, is this a deductible expense? If yes, would be for 2026, correct?

Thank you

Has the business organization yet filed its 2025 income tax returns? Has the individual yet filed her 2025 income tax returns? Or, is either planning toward a September 15 or October 15 due date?

What does the written plan provide about when an elective-deferral contribution is due?

Further, consider that, under the 1978 Reorganization Plan, the Labor department’s interpretation about when a participant contribution becomes a plan’s asset is relevant also for Internal Revenue Code § 4975 about tax-law prohibited transactions. 29 C.F.R. § 2510.3-102(a)(1) https://www.ecfr.gov/current/title-29/part-2510/section-2510.3-102#p-2510.3-102(a)(1).

If there is a contract breach, fiduciary breach, or prohibited transaction to correct, a relevant State’s law might allow a reasonable measure of restoration. Or, the Internal Revenue Service might consider a use of EBSA’s calculator reasonable.

This is not advice to anyone.

9/15 is the deadline.

It is Roth deferral

Thank you for your input

Did the owner get paychecks?  Were the amounts actually withheld from a paycheck?  If so, then I think you have to look at DOL Fiduciary breach rules.  The company will owe earnings to the owner plus maybe a penalty tax.

Yes, owner gets a paycheck. I am assuming they were withheld from the paycehck as the w2 shows a ROTH deferral.

If it came out of the paycheck and not remitted to the trust, you have late deposits.  There's nothing in the regs (that I see) that would exclude an HCE or even owner from the rules.

Thank you for confirming my findings (or lack thereof).

Follow up

The penalty is not tax deductible correct?

What is an acceptable way to calculate the penalty?

As only the owner plan, is 5330 required?

The DOL deposit deadline applies to plans subject to ERISA, no? The plan document language applies otherwise, right?

John Feldt: For a plan that’s not ERISA-governed, a State’s law governs whether there was a breach of the written plan or other contract. Likewise, a State’s law governs whether there was a fiduciary’s breach. For either, a State’s law govern what damages, restoration, and other equitable relief might be due.

But—apart from whatever the employer might or might not owe the retirement plan—consider that, under the 1978 Reorganization Plan, the Labor department’s interpretation about when a participant contribution becomes a plan’s asset is relevant also for Internal Revenue Code § 4975 about tax-law prohibited transactions. 29 C.F.R. § 2510.3-102(a)(1), https://www.ecfr.gov/current/title-29/part-2510/section-2510.3-102#p-2510.3-102(a)(1).

Jakyasar: About whether a disqualified person’s payment of an Internal Revenue Code § 4975 excise tax might be an ordinary and necessary business expense and otherwise not nondeductible, consider that a professional’s fee for reliable advice on that question might be greater than the value, in the circumstances you describe, of the deduction.

This is not advice to anyone.