Schedule H, line 4a - maximum time period - "15th business day&qu

[John A]

Should Schedule H, line 4a, be answered based on DOL Reg 2510.3-102(a) or 2510.3-102(B)? That is, is the 5500 Schedule H question answered based on the "15th business day of the month following the month in which the participant contribution amounts are received" or is it answered based on "the earliest date on which such contributions can reasonably be segregated from plan assets?"

I know there have been other threads saying that the DOL has focused on the "earliest date" language for determining whether or not a 5330 was required, but I have not seen a thread on which standard should be used for the 5500 question.

[Guest Emiliano]

The answer is the earliest date that the assets can be reasonably segregated from the employer's assets BUT under no condition can this be later than the 15th business day of the following month.

[R. Butler]

I don't disagree with Emiliano's response, but I generally answer the question based on the 15th business day. I explain the DOL's position to all clients. I urge them to remit ASAP after every payroll period. However, a "reasonable" standard by definition is subjective. It is very difficult to convince employer's that there view of "reasonable " is incorrect. The DOL really needs a much more objective standard.

[John A]

Thank you.

There is confusion in our office due to the precise wording of the question and the regulation. Specifically, the question on the Schedule H is:

"Did the employer fail to transmit to the plan any participant contributions within the maximum time period described in 29 CFR 2510.3-102? (see instructions) "

The wording "maximum time period" is confusing, because 29 CFR 2510.3-102(B) is labeled:

(B) Maximum time period

while 2510.3-102(a) is labeled:

(a)General rule

If the Schedule H question was meant to refer to the general rule, why wouldn't the question have left out the term "maximum" and just read: "Did the employer fail to transmit to the plan any participant contributions within the time period described in 29 CFR 2510.3-102?"

But the instructions for line 4a refer to the "earliest date" language without using the "maximum time period" language.

There is no difference of opinion in our office about the actual standard being the "earliest date" language, but there is a difference about what the 5500 Schedule H question is asking.

R. Butler, do you think you are running a risk of having to file amended 5500s by answering based on the "15th business day" language (if the DOL were to audit the plan and find that an earlier standard should have applied)?

[R. Butler]

John A.,

There may be a risk in having to amend 5500's, but I am not overly concerned. It is not too difficult to ammend for the one question. I am much more concerned over 5330's. Should I file if money deposited 5 days after payroll? 8 days? 10 days? Obviously I am concerned about not filing when maybe I should be, but also I am concerened about filing when maybe I don't have to file. The DOL really should set forth a more objective standard.

[Kristina]

I agree with R. Butler that there is not as much risk if you answer the question no, based on the 15th day rule. However, my reading of the plans that have been audited by the DOL would indicate that they allow very few days from the date they (the DOL) determine the contributions could be separated from the sponsor's funds until they are to show up in the plan assets. A TPA told me of a bankrupt plan sponsor who was trying to terminate a 401k plan when an employee complained to the DOL about a COBRA notice and now the DOL is going thru the 401k plan and calculating penalties and losses to the participants based on a one-day timeframe for the deferrals to be deposited into the plan. (Guess the DOL doesn't use the same postal service the rest of us use. eh?)