Timing of 401(k) Deferral Deposits

[Guest ANNEBV]

Plan Sponsor has multiple payrolls (weekly, biweekly, semi-monthly). 401(k) contributions (& ER Match) are remitted to trust once per month, primarily to accomodate the fact that there are multiple payroll schedules. Contributions are therefore invested in participants' accounts just once a month.

Are there significant issues with DOL deposit rule re: "segregating from ER general assets in reasonable timeframe"? Payroll taxes are paid more frequently than monthly. Contributions could easily be segregated from general assets more frequently. What if contributions are remitted on payroll basis, held in a master trust account, and still invested only monthly? Should master account be interest bearing?

Anyone have any strong thoughts on this?

[chris]

Don't do much actual administration work, but the DOL would probably argue that you should be able to segregate them out just as quickly as you deal with the payroll taxes. I have advised clients in the past to dump the monies into an interest bearing account in the name of the plan and then get them to the broker as soon as possible. I believe the rule requires segregation from the general assets and does not say they must be invested within the time frame. Others probably have additional more hands-on advice......

[Archimage]

Agreed.