2004 calendar year 401(k) Profit Sharing Plan (earmarked accts.) that has a discretionary matching contribution. The client deposited the match into the trust (non interest bearing cash account) before the due date of the Corporate tax return (9/15/2005), but the allocation to participant accounts didn't take place until 3/15/2006.

What issues do we need to look at here? This doesn't pass the smell test.

Thanks in advance for any input!!

What do you mean "allocation"? Did anything happen between 09/15/05 and 03/15/06? Anyone paid out? If not, do you have a problem?

What does the plan say?

The plan has earmarked accounts set up for each participant, as well as a "general account" (non interest bearing account). The money was put into the GA 9/15/2005 but the match did not get transferred (I had said allocated) to each e/m account until 3/15/2006. No deduction issue here since it was deposited timely (by due date of tax return) but I am wondering if there are any other issues I need to look at. Doc. doesn't address this.

IMHO you have fiduciary issue in that the funds left in the GA didn't earn anything. Doesn't seeem to be prudent investment made on befalf of the participants.

I definitely agree it's a fiduciary issue, but since it's a discretionary employer match, what would the correction be, if any? I can't see the client wanting to allocate "lost earnings" on a discretionary contribution for over 200 participants. But if that's the conservative approach, I'll let the client know that's what they should do.

Thanks!