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Late Deposit of Deferrals?


BG5150

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Pay Date 3/15/16.  $450.00 in deferrals for a few people.  Deposited at record keeper's unallocated account on 3/21.  So, the funds hit the trust within the safe harbor time limit.  However, the money is STILL in the unallocated account.  Do I have a "late deposit"?  If not, is there any sort of correction other than allocating it, plus earnings to the proper accounts?  What if there was a loss in the account?

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.

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I agree with RBG.  The rule really isn't a "late deposit" rule - it's a "late segregation" from employer assets rule.  Not allocating (and then investing it) is more a general fiduciary problem rather than a PT.

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  • 4 months later...

May I ask a related question of you guys?  My client cut deferral checks to the brokerage firm/custodian in a timely manner.  Each employee has a segregated account at said firm.  The brokerage firm did not deposit a few of the checks for exorbitant amounts of time (one was 60 days later!).

Where can I read more about this topic?

And ...  What is the remedy?  Does my client need to formally ask for the brokerage firm to calculate & credit the employees' accounts with lost earnings?

 

Thank you so much.  I may copy & paste this question into a new topic, but this thread is somewhat related.

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RestAssured

As you set out the facts there isn't much to read.  This does NOT fall under the late deposit rules.  If the assets were segregated from the employer's asseets timely then the deposits were not late per the DOL rules.

That does not mean there isn't a problem.  If the fiduciaries can't figure out how to get the brokerage to do its job right then they are doing a breach of fiduciary duties.  (One could make a case this is worse as I believe they can be held personally liable for such a breach.) 

So if there is anything to read it would be on fiduciary breaches but you won't find this specific example spelled out any place.  The duty is the Prudent Man Rule and Due Care Rule (I think that is the correct name.)

To me you nailed the correction.  The trustee of the plan ought to ask the brokerage to make up for any lost earnings based on the actual investments.  They should also get a written commitment on how they aren't going to allow this happen again.  If they can't get this corrected a very strong case can be made they simply have to get a new brokerage firm. 

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