funding 401k before paydate

[Guest lindamichals]

Is there an issue with an employer issuing checks or processing ACH debits before the actual payroll check date?

For example, employer has capability of going online with Nationwide, posting their 401k deferrals and processing an ACH debit when they have the payroll DATA. Let's say this is done 3 days before the employees actually receive their paychecks. Also, let's say, Nationwide takes 2 days to post the 401k and remove the funds from the employer's account. So in actuality, the employee's 401k is in their Nationwide account on the exact payday(or maybe even a day before).

Anyone see an issue with this? Thanks.

Linda Michals

[Tom Poje]

the preamble to the final regs says

in regards to prefunding

'only if contributions are made after the performance of services which relate to the compensation....

amounts contributed in anticiaption of future performance of services are not treated as elective contributions...

it does not sound as if the situation you describe falls into that category, so it sounds like you are ok