Late 401(k) Deposits

[Medusa]

When preparing a 5500 for a client, how do most of you feel that the issue of "late deposits" should be decided for reporting purposes? Are you using the "bright line" standard of 15 days after the month, or the "as soon as administratively feasible" standard?

We have been going with the latter, but it is seeming that we might be alone on this.

Med

[jpod]

You might very well be alone (because I've seen it as well), but you are interpreting it in the way in which the DOL expects you to interpret it.

[J Simmons]

You're not entirely alone, Medusa, but based on my observations, you are likely part of a cautious minority.

[JanetM]

We also follow the administratively feasable timeline for our 4 plans. If we normally do the deposits in 2-3 days then 7 days is reportable unless there is good reason for it.

[Mike Preston]

Me thinks she meant her "401(k)" plans, not her "4" plans. Maybe.

[Medusa]

Thanks guys. I only want to be as strict as others, not more strict!

[jpod]

Medusa: After a very careful, line-by-line reading of the question on the Schedule H or I, as the case may be, and then the same careful reading of the instructions, I think one should find it very difficult to interpret the question as referring to the 15-day deadline, rather than the "as soon as administratively feasible" rule. The instructions do not even mention the 15-day deadline, so the "deadline" referred to in the question must be the "as soon as administratively feasible rule," in my opinion. While it would not surprise me that most preparers automatically assume that the question refers to the 15-day deadline, I would not characterize the other interpretation as "too strict."

[Belgarath]

While I agree with the prior posts, let me just spend a moment playing Devil's Advocate here. As a TPA, how do you make the determination of what is and is not as soon as "administratively feasible?" Particularly in small employer situations where there is no highly automated payroll service handling things?

In other words, are you making this judgement yourself, or do you provide an informational disclosure to the client, and make the client decide, for anything between day 1 and the regulatory maximum?

[jpod]

Belgarath: You bring up a very good practical issue. I am not a TPA, but what I have advised clients that are TPAs or otherwise responsible for preparing the 5500 that the burden must be placed back on the employer to answer this question. The nature of the question on the Schedule H or I should be explained in detail to the client (a one-page form should do the trick). Make the client give you the answer(s) to the question in writing. If not, return the forms to the client for signature without answering the question, pointing out to the client that it is blank and needs to be answered, and do not include your name as the "Preparer."

[JanetM]

Mike, I am plan sponsor of four (soon to be five) 401K plans and 13 DB plans.

[Medusa]

FWIW, we do ask the client how they want us to answer the question, after re-explaining the rules to them. If we know they are late and they choose to answer that they are not, we advise them of their audit risk. What worries me a little more about using the 15 day standard is the possibility of the DOL catching onto this and auditing all of our clients' 5500's. That would not be good. However, it doesn't sound like this is something on their agenda. Plus we never sign as preparer.

[JanetM]

This plan must not be audited, if it wast he auditors would most likely catch this. I would also do a CYA memo to the file on this, maybe even send the plan sponsor copy of reg along with your understanding of the true application. That way they would not be in position to say you gave them bad advice when the DoL or IRS come knocking.