Deferral Contribution Timing

[Guest mb4]

I know this is a dead horse but can someone give me guidance on when elective deferrals need to be deposited after they have been witheld. I'm confused considering the 15th of the following month guidance and more recent things saying if you are audited it's a 7 day time period to be considered administratively feasable.

[katieinny]

I feel pretty comfortable answering this one because one of our plans was just audited by the DOL, and the outcome was that the employer needs to get the contributions in quicker than he had been.

There is no right answer because there are always extenuating circumstances and variables that come into play. But it seems to me that the rule of thumb has been shortened to no more than 5 days beyond the date the funds have been withheld from pay, and in many cases it could (and should) be done sooner than that.

One of the primary reference points is how quickly other withholdings get to where they need to be. That would be a good starting point.

[rcline46]

The rule is "as soon as can be segregated from the sponsor's assets but no later than the 15th business day of the next month".

First note that it is the 15th business day, not the 15th.

Second note that if you can get deferrals made on the the 31st deposited by 15W, you can get deferrals made on the 1st deposited in 15W!

Third you cannot ignore the "as soon as can be segregated". I just attended a lecture by a DOL investigator and he settled with an employer at 2 days.

If you can issue the pay checks and deposit taxes for people who do not defer in 3 days, you can certainly deposit the deferrals into the trust in the SAME 3 days because it is the SAME money! And that is the DOL position. You have to prove some business necessity for a longer period.