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Limit on time to remit to Investor


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#1 Guest_named_Liz Propp_*

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Posted 23 October 1998 - 11:46 AM

I am curious what the time limit (in days) is (maybe from the IRS) that an employer can hold onto the 403(B) money withdrawn from employee paychecks before they send it to the investment vehicle. Is there a different time limit on the 403 (B) employer's match portion?

#2 Guest_named_Kathy_*

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Posted 23 October 1998 - 02:10 PM

I think the time frame you're looking for is actually under the jurisdiction of the Department of Labor. ERISA requires that monies withheld from the employees' pay be invested as soon as they can be separated from the general assets of the employer but no later than the 15th business day after the end of the month for which they were withheld. As a general rule, the employer match doesn't have to be made/invested until the after the end of the year.

#3 Guest_named_caroline Malvasio_*

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Posted 27 October 1998 - 12:29 PM

Does anyone know where I may obtain documentation (i.e., what labor law, IRS code, ect.) that it is written - when an employer is required to hand over the funds collected from an employee's pay concerning a 403B plan to provide to the employee's financial instituation?

Also, where may I find the documentation that states the time requirement for when an employer's contribution to an employee's 403B must be handed over to the employee's financial institution?

Third questions:
Where is it written - How long, by law, is the financial institurion of a 403B plan given to post funds received to the emloyee's 403B account?

Thank you!

#4 Guest_named_Robert Collins_*

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Posted 30 October 1998 - 11:46 AM

In response to Caroline Malvasio.

When the 403(B) is subject to ERISA, under DOL Regulation 2510.3-102, employee contributions must be send to the investment vender at the EARLIER of: 1) 15 business days after the end of the month, or 2) as soon as the employer can reasonable separate the money from its books. Think of the 15 day rule as the maximum number of days. If the employer’s payroll system has the ability to determine employees’ contributions within a few days after the end of a payroll period and a check or wire can be cut/issued in a day or two, then it is reasonable that the employees’ contributions should be sent within a week after each payroll period.

When the 403(B) is NOT subject to ERISA, employee contributions must be submitted under state fiduciary rules.

For employer contributions, the rules are based on language in the retirement plan document. Many 403(B) plan documents discuss when contributions must be credited to employees’ accounts. For for-profit employers, contributions to qualified plans must be contributed by the time employers file their federal tax returns. Although this rule may not directly apply to 403(B) plans since there are no tax deductions involved, it seems logical that when the tax-exempt employer files its information return (990), that contributions shown on the return represents actual contributions made to the 403(B) plan.

When the financial institution is a mutual fund company, the posting of funds to employees’ accounts is covered in the prospectus and subject to SEC and NASD rules. Similar rules apply to variable annuities as well. When fixed annuities are used the annuity contract should discuss this subject. But beware, most prospectuses and annuities have "in good order or in the correct form" language. If the employer’s instructions to the financial institution are incorrect, this could affect the crediting of contributions.



[Note: This message was edited by CVCalhoun]

#5 Guest_named_CVCalhoun_*

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Posted 30 October 1998 - 01:30 PM

Thanks, Robert! I just edited your message to add a link to the DOL regulation, so that Caroline (and anyone else who is interested) can click on the cite in your message and see the regulation itself.

#6 Guest_named_MWeddell_*

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Posted 02 November 1998 - 10:25 AM

For 403(B) programs that are not ERISA plans, the 15 business day after the end of the month deadline doesn't apply. However, it's possible to argue that if an employer takes a long time to forward the money to the annuity issuers that the employer is not just collecting and remitting contributions, as anticipated by Labor Reg. 2510.3-2(f)(3)(iv), but is deriving a financial benefit from the arrangement. One can then argue that the employer's involvement falls outside the safe harbor to remain non-ERISA and that the 403(B) has become an ERISA plan and the 15-business day after the month end rule now springs into affect.

I've never seen that line of argument used, but it does point out that it might be prudent for employers with non-ERISA 403(B) programs to still try to adhere to the 15-business day after the month ends deadline.


[Note: This message was edited by CVCalhoun]

#7 Guest_named_PeterGulia_*

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Posted 21 November 1998 - 01:54 PM

There's more to consider here. In addition to the civil law rights and remedies (some, but not all, of which were described in the previous messages), some failures to remit promptly the plan contributions may constitute a federal crime.

"Any person who embezzles, steals, or unlawfully and willfully abstracts or converts to his [sic] own use or to the use of another, any of the moneys, funds, securities, premiums, credits, property, or other assets of any ... employee pension benefit plan, or of any fund connected therewith, shall be fined not more than $10,000, or imprisoned not more than five years, or both." 18 U.S.C. 664.

If, at a time when the participant contributions have become "plan assets" within the meaning of the DoL interpretive regulation, the employer has failed to remit the contributions, the employer (and perhaps those individuals who had authority to make a payment) may be vulnerable to a criminal prosecution based on conversion if the facts show that the employer chose to delay a contribution. While the published court decisions are confusing, the Government has gotten more aggressive in recent years.

As a matter of enforcement policy, a DoL investigator usually won't make a referral to the U.S. Attorney if the employer provides restoration by paying the delayed contributions with reasonable interest or investment income.

Also, if a breaching fiduciary is a participant in the plan, his/her own retirement benefit may be subject to a court-ordered set-off. ERISA 206(d) and IRC 401(a)(13), as amended by TRAof1997.

#8 Guest_named_Phantom_*

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Posted 03 May 1999 - 01:58 AM

How do find out if your employer is
under the ERISA rules for contribution
timeliness ?