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Call them and explain that you never had constructive receipt of the funds; so there is no "60 day period". Hence, I have no idea what "date" would've passed. They should reissue the check as originally issued; made payable to the rollover institution FBO you as a direct rollover. You may have to get a supervisor on the line, because apparently the person you spoke to on the phone doesn't know what they're doing. Good Luck!

It is a PT only if correctable and, at some point, corrected. What you are describing comes closer to theft.

Just as an aside - we currently have a client under DOL audit where failure to timely cash out small balances is also an issue - and the agent wants the company to restore the fees taken from those balances - EVEN THOUGHT THE MANDATORY CASH OUT IRA PROVIDER WOULD HAVE CHARGED BOTH INVESTMENT LEVEL FEES AND A PER IRA CHARGE FAR IN EXCESS OF THAT WHICH THE PLAN DOES. In fact, almost half of the subject accounts would have been consumed by the IRA provider's fees by the time the audit is complete.... I file this under the penny wise, pound stupid category - and it applies to someone else's pennies.

The arrogance is compounded, I think, by the fact that if it's over $1,000 and you don't hear from the participant you must do an automatic rollover, and quite often the annual charge is going to be more than $28 per year.

If I read this correctly the DOL seems to be really keying into the fact the plan said these people "will" be paid. So is the cynical defensive move to change the plan to "may" be paid?

What Mike said. One other issue I'd possibly be concerned about (and admittedly this may be a stretch) is a possible breach of fiduciary duty. PARTICIPANTS are being allowed to direct investment of plan funds to which they are not yet entitled. To me, this is different than someone who just isn't 100% vested in their account. Again, as Mike said, the whole thing is a very bad idea.

Well, I did say as a self correction, not purely ignoring any problems. If the only thing going on is that the employer deposited salary deferrals for two pay periods at the end of the firist pay period, and the employee worked through the end of the second pay period (and thus earned into the deferrals) I just don't see much of an issue.

How about "illegal"?