Timing of Employer Matching Contributions and Employer Non-Elective Contributions

By Anthony L. Scialabba IV, Esq., QKA

 

When must employer matching contributions and employer non-elective contributions (“employer contributions”) be deposited?

 

Employer contributions are bound by two annual deadlines. One deadline is for “annual additions” purposes, while the other is for “deductibility” purposes. The deadlines will depend upon what type of employer contributions you make and the federal tax status of your company.

 

What are the relevant dates to be aware of in connection with the annual additions deadline?

 

Under Internal Revenue Code (“IRC”) section 415(c)(2), annual additions means the sum of employer contributions, employee contributions, and forfeitures for each year. Under IRC section 415(c)(1), annual additions are limited by the lesser of a specified amount or 100 percent of the participant’s compensation. For 2023, the limit for defined contribution plans is $66,000.

 

Regardless of what the applicable limit is for a year, the annual additions deadline is based upon the type of contribution utilized. If your plan has employer matching contributions and or employer non-elective contributions, then the deadline to allocate to participants’ accounts is 30 days following the due date of your company’s federal tax return (with extensions).

 

What are the relevant dates to be aware of in connection with the deductibility deadline?

 

The deposit of employer contributions must occur no later than the due date, including extensions, of a company’s federal tax return. The potential deadlines for your company:

 

• C-Corporation (or Limited Liability Company taxed as a C-Corporation)
  • Deadline: April 15; Extended Deadline: October 15
• S-Corporation (or Limited Liability Company taxed as a S-Corporation)
  • Deadline: March 15; Extended Deadline: September 15
• Sole Proprietorship (or Limited Liability Company taxed as a Sole Proprietorship)
  • Deadline: April 15; Extended Deadline: October 15
• Partnership (or Limited Liability Company taxed as a Partnership)
  • Deadline: March 15; Extended Deadline: September 15

 

What if employer contributions are not allocated to participants’ accounts by the annual additions deadline?

 

A plan qualification failure occurs in this scenario. The remedy for which would be to fix the late contributions through a service offered by the Internal Revenue Service (“IRS”) called the Employee Plans Compliance Resolution System. In any event, there may be serious ramifications like plan disqualification or penalties by the IRS.

 

If you have any questions or comments with regard to the timing of employer contributions, please call 856-396-0499 or email clientservices@retirewelltpa.com.