Treatment of Allocations for Reclassified Employees (Posted March 8, 1999) Technical Tip 2: The following question and answer were from the IRS Q&A session at the 1998 ASPPA Annual Conference: If independent contractors are reclassified by IRS as employees, how do now required contributions for past years count in a defined contribution plan for both 404 and 415 purposes? Can we include the previous years’ compensation for current 404 purposes? Is the full amount deductible in the current year when made? IRS Response: For 415 purposes, it generally relates back to the early period. For a MP plan, the standard deduction rules apply. For a PS plan, it is possible that you can end up with a 404 violation. This can be dealt with in a closing agreement. View all Tips © 1999-2012 Reish Luftman Reicher & Cohen, a Professional Corporation Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation.