timing of remitance of manditory participant contributions

[Guest JGriner]

Those of us that work on 401k plans know all to well the requirements for remiting participant contributions to the plan on a timely basis. I have now incounterd my first DB plan with mandatory employee/participant contributions and want to know if the same rules govern remitance to these funds. Specifically, if the employer/sponsor withholds the employee/participant contribution on a per pay period basis (bi-weekely) can they elect to remit/transger these funds to the plan once a quarter? Is there any guidane on the timing of the remitance for these funds?

Thanks!

-Jimmy

[J2D2]

Off the cuff, I'd say that the same rules apply. The rules define "plan assets" and, if memory serves, do not refer just to 401(k) plans.

[jpod]

If the DB plan in question is a plan that is subject to Title I of ERISA, the same rules apply.

If ERISA does not apply, the time limit - if there is a time limit - will be found by consulting state law and the terms of the plan.

[SoCalActuary]

Your issue is less common than 401k late deferrals.

The employer is still responsible for the eventual benefits in the plan, so late deposit only hurts the employer's funded position in the pension plan. The employee is still entitled to the same employee-paid portion of the plan benefits, even if the funds are late.

The employer is holding plan assets beyond a reasonable period, IMO, so there is probably a PT tax as well.

[jpod]

Whether or not we think the employer is holding the $$ for an unreasonable period of time is irrelevant, if this is an ERISA plan. If it is an ERISA plan, most of the $$ is not being deposited by the drop-dead deadline in the regulation.

I keep harping on the "ERISA" issue because in my experience there just aren't too many contributory DB plans in the private employer world any more; most of what I see today is in the governmental sector.

[Guest JGriner]

Your issue is less common than 401k late deferrals.

The employer is still responsible for the eventual benefits in the plan, so late deposit only hurts the employer's funded position in the pension plan. The employee is still entitled to the same employee-paid portion of the plan benefits, even if the funds are late.

The employer is holding plan assets beyond a reasonable period, IMO, so there is probably a PT tax as well.

SoCalActuary - Thanks for the input. The DB Plan I am referring to is maintained by a Credit Union for its employees. Which is not a government Plan and is therefore subject to ERISA. Do you have any suggestions as to how to determine positively if the Plan is subject to ERISA?

What does "IMO" in your reply stand for?

Lastly, I agree that the employee will receive the same benefit and that the employer would be responsible for making up the difference (if any) resulting from late remitances. But all that aside, I don't see where this changes the fact the the employer sent the eployee funds to the plan in a non-timely fashion.

Thanks,

-Jimmy

[Guest JGriner]

Whether or not we think the employer is holding the $$ for an unreasonable period of time is irrelevant, if this is an ERISA plan. If it is an ERISA plan, most of the $$ is not being deposited by the drop-dead deadline in the regulation.

I keep harping on the "ERISA" issue because in my experience there just aren't too many contributory DB plans in the private employer world any more; most of what I see today is in the governmental sector.

jpod - Thanks for the reply. Do you have any suggestions as to how to positevely know if the Plan is subject to ERISA. Tha Plan I am referring to is a DB Plan maintained by a Credit Union for the benefit of its employees and is not a government Plan.

Thanks,

-Jimmy

[SoCalActuary]

The shorthand for IN MY OPINION is IMO.

If you have access to the 5500's filed for this plan, they will indicate that this plan is subject to ERISA.

Gov't plans don't file. Non-profit organizations file 5500 except those that are gov't plans or church plans.

My experience with plans that are late payers comes in two major categories: criminal and negligent.

If a plan is using employee money to cover its cash flow, as some seasonal companies do,

they are using plan assets for their own purposes, and should be made to pay

the full penalties & interest if caught. Your job is to explain the consequences with many of the weekly

examples of DOL enforcement published in Benefitslink and elsewhere.

If a plan has untrained staff with too much to do and not enough management oversight, then the pension

contribution will simply be neglected until someone raises a fuss. Non-profits that fail to follow the rules

usually fit in this category. Your job is to raise that fuss. If the client still fails to respond, then start

explaining the consequences, because the client is no longer negligent once you have informed them.

[jpod]

If the employer is NOT a federally-chartered credit union, the plan is subject to ERISA.

As a result of a 2004 IRS private ruling dealing with Section 457 of the Code, there is some uncertainty as to whether a plan maintained by a federally-chartered credit union is an ERISA plan or an exempt governmental plan. IRS and DOL are studying this right now. With that said, however, in all likelihood the employer has been filing 5500s, paying PBGC premiums and otherwise treating the plan as subject to ERISA, so that pretty much forces the employer's hand unless and until there is some dramatic announcement by IRS and DOL that plans of federal credit unions are governmental plans exempt from ERISA.

[Guest mjb]

The IRS ruling on 457 plans for fed credit unions relied on Rev rul 69-283 which held that fed chartered credit unions were considered federal instrumentalites under IRC 501©(1). The IRS has deferred a final answer on the question of whether federal CUs are eligible for 457 plans. See Notice 2005-58. Under fed case law the determination of whether an employer is subject to ERISA is whether the employer is a private employer and not a public employer. Filing of 5500 reports, plan docs reciting coverage under ERISA, etc does not result in coverage under the act if the employer is a governmental entity since, unlike churches, govt entities cannot waive their exemption from ERISA. Therefore govt entities are not subject to regulation under ERISA.

[SoCalActuary]

mjb's post was very informative to me.

Now it raises the question on the original post - if the deposits are late, but it is not an ERISA plan

(still to be determined for this instance), is there a violation of fiduciary duty or a reason for

PT excise taxes?

Especially since the participants are not harmed by the late deposit, does the DOL have any issues here?

[Guest mjb]

PT rules/PT taxes do not apply to govt plans. IRC 4975(g)(2), ERISA 4(b)(1).