timing of deposits

Client initiate new 401(k)/PS plan effective 1/1/18.Plan consists of three participants, father and 2 sons, no common law employees.

The makeup of the company is such that they do not have steady income, but rather receive in huge chunks during the year.

Can they make their deferrals in one shot during the year?

I remember somewhere that as long as the income for the month is at least the max deferral, this would be kosher, but never ran into this situation before.

2 hours ago, thepensionmaven said:

Can they make their deferrals in one shot during the year?

Sure, why not?

2 hours ago, thepensionmaven said:

I remember somewhere that as long as the income for the month is at least the max deferral, this would be kosher, but never ran into this situation before.

Income for the month doesn't really matter, but you can't defer compensation you haven't received. All that matters is that you have compensation to cover the deferral.  The actual deposit still has to be made as soon as you can segregate the deferrals from the Employers assets.  Since you have a plan under 100 participants, you can use the 7 business day safe harbor. 

So when they get "chunks", are they paying it out as w-2 income? Or are they self employed and just getting a draw? Because their actual income then wouldn't be determined until much later.

Bill his the nail in the proverbial head.

If W-2, they can elect to defer 100% of any net paycheck; we have lots who make their full deferral out of a single bonus check in December.

if K-1, then they can put the funds in any time during the year but it is all treated as earned at the end of the year.  We mandate that our clients make their deferral deposits by year end, even though there is a slippery slope with self-employed individuals that can be argued allows them to make the deposit of their elected deferral (which does have to be done prior to the year end) sometime after the year end.  We don't like having to deal with that so we avoid it if at all possible. 

Assuming they are self-employed (K-1), they just have to have their written deferral election filed with the plan administrator (yes, themselves) by 12/31 (assuming plan year is calendar year). So yes, they could defer in "one shot" in December. If the plan just covers the dad and sons, and again the firm is a partnership or LLC taxable as a partnership, ERISA does not apply, but the deposits for any elective deferrals actually elected by the participants should be made within a short time after the compensation from which the deferral is taken is paid. The match and any profit sharing can of course be made by tax return filing deadline.