The earned income of a self-employed individual or a partner is treated as being currently available on the last day of the individual’s taxable year. There is no guidance indicating an exact date by which the amount they are deferring must be physically deposited in the Trust. However, they must complete an elective deferral election form by the last day of the relevant tax year which declares the dollar amount or percentage of income to be deferred. This restriction does not prevent a partner or sole proprietor from deferring on amounts paid during the year as a draw on account of services performed by that self-employed individual; however, the owner-employee would have to show a profit for the contribution to be valid. A self-employed individual must make sure that amounts contributed during the year do not exceed statutory limits, such as the 415 limit, based on the individual’s actual earned income for the period. According to DOL guidance updated in 1996, the timing issue that normally applies to plan participants that requires that deferrals be deposited as soon as administratively feasible, but in no event more than 15 business days after the close of the month during which they were withheld, does not apply to partners in a partnership plan until after the time that the partnership would have otherwise distributed the amount to the individual partners.

Note: The final regulations confirm that matching contributions for sole proprietors and partners are no longer treated as elective contributions.