For plan sponsors concerned about cash flow, what flexibility exists with regard to 2019 contributions?

Certain types of contributions are mandatory, like safe harbor contributions, top-heavy minimum contributions, and employer profit-sharing contributions in combination plans such as a defined benefit/cash balance plan and 401(k) profit-sharing plan. Those contributions must be made.

For discretionary match or profit-sharing contributions, there is no simple one-size-fits-all answer. While there is discretion, what was communicated to participants could come into play. For instance, if participants are encouraged to defer into the plan with a promise of employer-paid match or if a profit-sharing contribution is an expected component of total compensation promised to employees, it may be difficult to back away from making that contribution. Since each situation will have a unique set of facts and circumstances, it is best to review each situation with your plan consultant.

Note: There is a nuanced distinction between a contribution deadline and a deadline for deduction purposes, which is generally the tax filing deadline including extensions (e.g., September or October for calendar year filers). The tax code specifies when various contributions must be deposited to maintain plan compliance (think safe harbor contributions, top heavy minimums, and discretionary contributions). Generally, these contributions may be made as late as the last day of plan year following the plan year for which the contribution is due, so it might be possible to “cashflow” those commitments and make good on promises made to participants while fulfilling regulatory requirements.

Cetera Retirement Plan Specialists is a third-party administrator and may not offer tax, legal or investment advice. Plan sponsors should consult their own tax, legal or investment professionals.