Timing of elective deferral contributions.

[katieinny]

Has the DOL come out with a reg. that says elective deferrals must be deposited within 5 days after the payroll date?

I am familiar with the reg that says contributions must be made as of the earliest date they can be segregated from the general assets, not to exceed 15 business days after the end of the month. But someone just told me that a new DOL reg came out.

[E as in ERISA]

I haven't seen an update to the regulations and don't expect there to be one. But on audit the DOL definitely applies the "earliest date they can be segregated" rule -- which many times would be five days after payroll.

[pmacduff]

One of my clients threw that same one at me a few weeks ago. Apparently, they had gotten something from an Investment Advisor (go figure) telling them that the deadline was 5 days. I think many of the investment firms (in the best interest of their clients - of course - not to get funds invested sooner with their firm...) are trying to advise clients about this issue and they don't all have a really clear understanding of how it actually reads (earliest segregation date). Oh well. I guess it's better than clients taking too long for deposits........more bad info though

[katieinny]

After making some phone calls, it seems you are right. I understand that the DOL is putting the pressure on, and the 5 day thing seems to be what they are shooting for. The fact that some of these cases are getting some public attention has the advisors trying to put the fear of God into their clients.

[2muchstress]

The argument I have from the DOL is that if an employer can make the federal tax deposits within 3 days after payroll, then there is no reason they couldn't be able to make 401k deposits.

Which would basically mean that all contributions must be made by wire or ACH debit. Gone are the days of floating checks.

[E as in ERISA]

There are some differences -- e.g., the 401(k) monies will typically be invested in various funds and the FICA isn't. So there is a little more admin that has to take place before the 401(k) can be deposited. Of course, a lot of it is done electronically. But one can argue that a good plan administrator would review to make sure that the dollar amounts all match up before depositing the 401(k) monies.