Situation where a plan was in the process of transitioning from one carrier to another in Feb. 2006 and the employer sent the broker the 2005 PS contribution rather than to either the old or new carrier. Contribution was made by the employer before their 2005 tax filing date (3-15-06 no extensions) and was claimed as a deduction for the 2005 year. Contribution was held at the brokerage in the name of the plan.

The problem (one of them any way) is that that 2005 PS contributions still hasn't been allocated.

1. Can it be allocated for the 2006 year or does it have to be allocated for the 2007 year?

2.It would be considered an annual addition for the year allocated?

This would present another problem because there may be some employees who would have ordinarily received an allocation of the 2005 contribution if allocated by 4-14-06 (1.415-6(b)(7)(ii)). But if they terminated before 2006 (or 2007) and have no compensation for the year allocated they exceed 415. Is this correct?

Is there any way to get those employees who may have terminated employment before the year of allocation any part of that 2005 contribution? Is outside the plan the only recourse for those affected former employees.

If I understand the situation you describe, and the contribution was appropriately made and invested as a 2005 contribution, the allocation should be made for the 2005 plan year, which at this point would involve amended returns, reports and disclosures.

Assuming that I understand what has happened...

I think you may be confusing "allocated" with "deposited" to individual investment accounts. Allocation is based on the 2005 data, calculating individual allocation values, which resulted in the contribution being deposited to a brokerage account that I assume was owned by the trust. What is left is division of that account into individual investment accounts which has nothing to do with annual additions of 2007. I assume that you know what the individual allocations of contribution are (using 2005 data).

Assuming that I am understanding the situation, terminated employees need an account established from which they would be paid their vested balance. Keep in mind that these people do have "rollover rights" depending upon the value due to them. You should not do "this" outside the trust.

Thanks for the replies. But I thought a plan contribution needed to be allocated to participants' accounts within 30 days after the 404(a)(6) deadline in order for those allocations to be considered 415 annual additions for the limitation year. Reg. 1.415-6(b)(7)(ii). Although the contribution in question was made to the "plan and trust" in a timely manner, it wasn't allocated to individual participants within the 1.415-6(b)(7)(ii) time frame. If this is correct, then the allocation to participants accounts shouldn't be counted as an annual addition for 2005. ??

The 415 issue above aside, doesn't this employer have a qualification (operational) problem because the 2005 contribution wasn't allocated to individual participants within the time specified in the document?

Unrelated question - are QNECs and employer contributions made to correct an EPCRS issue considered annual additions for the limitation year in which they are contributed?