Here is your latest FYI: Employee Benefits
Update from Cindy Van Bogaert, Partner and Chair of the Employee
Benefits Practice Group at Boardman Law Firm LLP.
This FYI addresses timing issues for matching contributions made
to 401(k) plans sponsored by for-profit corporate employers. The
law allows flexibility in plan design with respect to when the
matching contribution must be deposited. If we consider a for-profit
corporate employer sponsoring a plan with the same plan year/limitation
year as the employer's tax year, the employer generally can deposit
the match as late as the tax return filing deadline (with extensions)
for the plan sponsor for that year. So, e.g., a 2007 matching contribution
may not be made until some time in 2008. However, a plan may be
designed to have an earlier deadline. If the plan provides for
an earlier deadline for deposit, then the employer must follow
the timing set forth in the plan. (If your plan year or limitation
year is not the same as the employer's tax year, you should check
for other rules that apply.)
Employers should:
- Check plan documents to see what the deadlines
are for their plans.
- Be careful to accurately describe the plan
design in participant communications.
- If matching contributions
are made in the following year, take care to properly handle
the transaction so it relates to the year the employer has in
mind.
- Be aware that other timing rules apply to nondiscrimination
testing and annual addition limit testing.
In my BenefitsLink 401(k) Q&A column, I recently addressed
a question which provides more information about timing considerations.
Here is the link to the Q&A:
http://benefitslink.com/modperl/qa.cgi?db=qa_401k&id=74
Please contact me if you would like more information.
This FYI is not legal advice. Individuals should seek advice based
on their particular circumstances from their own counsel. Nothing
in this FYI is intended to be used, and no information can be used,
for the purpose of avoiding penalties under the Internal Revenue
Code, or promoting, marketing, or recommending to another party
any transaction or matter addressed in this FYI.
If you have any questions or need assistance, please contact Cindy
Van Bogaert at (608) 281-7543 or cvanbog@boardmanlawfirm.com.
Would you like to have FYI: Employee Benefits Update sent
directly to your e-mail inbox? If so, please send your request,
with e-mail address, to Cindy Van Bogaert at cvanbog@boardmanlawfirm.com. |
