Our company sponsors a safe harbor 401(k) plan that provides a matching contribution equal to 100% of the first 4% each participant defers. I had always thought that the deadline for us to deposit the match is the due date of our company tax return (with extensions), but my TPA mentioned something about a quarterly deposit requirement.
When are we required to deposit our safe harbor matching contribution each year?
You are going to love this answer: It depends.
The answer depends on a couple of factors – the reason you are asking and the timeframe used to calculate the match.
- Your plan document must specify the time period used to calculate the match, e.g. annually, quarterly, etc. If the document states the safe harbor contribution is to be calculated on an annual basis, you must deposit the match no later than the last day of the next year in order to comply with the safe harbor rules. So, if the match in question is for the 2018 plan year, you must deposit the match no later than December 31, 2019 (assuming the plan operates on a calendar year).
- If the plan documents specifies that the match is calculated more frequently – such as monthly or each pay period – you must deposit the contribution no later than the last day of the next quarter. For example, all matching contributions related to deferrals made in the quarter ended September 30, 2018, must be deposited no later than December 31, 2018.
- The above two deadlines are for compliance purposes. If your question relates to deposit deadlines in order for the company to take a tax deduction for the match, then your initial thought is correct. The contribution must be deposited no later than the due of the company tax return (with extensions).
For tax deductibility purposes, all is not lost if you miss the above deadline. Although you will not be able to deduct the amount deposited after the deadline for the current year, the company can claim the deduction on the next year’s return.