Late deposits--how many days late?

[BG5150]

Just taking the temperature of the room here.

What date do you use as the start to determine how late the deposit was.  Is it the pay roll date, or the end of the 7-day safe harbor?

 

For example:

Pay date:  1/4/21

Seven day safe harbor:  1/13/21

Deposit date:  1/15/21

You you use 1/4 as the starting date for interest calc (9 days late) or 1/13 (2 days late)?

[RatherBeGolfing]

1/4 no question.  It is only deemed timely if separated during the safe harbor window.  The 7 days are not applicable if you go beyond the safe harbor window.

I think the only question for this type of calculation is do you use the day of separation from the employer assets, or the day it cleared the participant account.  But that becomes a fiduciary issue rather than late contributions.

[C. B. Zeller]

If payday is Monday, and they usually make the contribution on Wednesday, then I would start the clock on 1/6.

[BG5150]

The usual is about 5 days later.

I don't think it's when it clears the participant accounts, that's for sure.  Oddly enough, the rules are not necessarily pro-participant, but anti-employer.  The DOL wants to make sure the ER is not getting unfair use of the money.  So, to me, it's when the funds leave the ER's control.

[RatherBeGolfing]

1 hour ago, C. B. Zeller said:

If payday is Monday, and they usually make the contribution on Wednesday, then I would start the clock on 1/6.

Why you would not count 1/4-1/5?

[RatherBeGolfing]

1 hour ago, BG5150 said:

Oddly enough, the rules are not necessarily pro-participant, but anti-employer.  The DOL wants to make sure the ER is not getting unfair use of the money.  So, to me, it's when the funds leave the ER's control.

I agree, its when it leaves the ER control.  I don't think this rule needs to be pro-participant though, if the delay between employer and participant is unreasonable, thats a fiduciary breach issue rather than a prohibited transaction. 

[C. B. Zeller]

17 hours ago, RatherBeGolfing said:

Why you would not count 1/4-1/5?

Because the employer set a precedent for the date that the contributions can be segregated from their general assets by always depositing on Wednesday. It is not late until the time established by their usual process and procedure has passed.

[BG5150]

The amounts in this case will be merely pennies.  Not to each participant, but the whole earnings calc.

[Christine Roberts]

I've had EBSA confirm that the 7-business day safe harbor is not used for earnings calculation purposes, the date the amounts normally would have been deposited is instead.  Or, 1/6 as C.B. Zeller suggests.

[BG5150]

56 minutes ago, Christine Roberts said:

I've had EBSA confirm that the 7-business day safe harbor is not used for earnings calculation purposes, the date the amounts normally would have been deposited is instead.  Or, 1/6 as C.B. Zeller suggests.

Can you share that correspondence?  Redacting any privileged info?

[Nate S]

On 11/18/2021 at 8:48 AM, C. B. Zeller said:

Because the employer set a precedent for the date that the contributions can be segregated from their general assets by always depositing on Wednesday. It is not late until the time established by their usual process and procedure has passed.

Isn't it supposed to be from the date the participant would have otherwise received had it not been deferred.  That's the asset segregation date.

[Peter Gulia]

If the seven-business-days variation does not apply, an amount withheld from a participant’s wages for her contribution or loan repayment is plan assets “as of the earliest date on which such contributions or repayments can reasonably be segregated from the employer’s general assets.”  29 C.F.R. § 2510.3 102(a)(1) https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-B/part-2510/section-2510.3-102#p-2510.3-102(a)(1).