Time limit to submit deferrals and matches

[Guest Rags]

Is there a time limit to submit employee deferrals and employer matches to a 401(k) plan? I'm working with a plan that doesn't seem to be filing these in a consistent time frame. I don't see the issue addressed in EPCRS. Might, this be a cause for some type of "Self-correction"?

Suppose a company took 2 or 3 months to submit deferrals and matches...?

[masteff]

My understanding is that it's more of DOL issue.

http://www.dol.gov/ebsa/publications/fiduc...onsibility.html

Employee Contributions

If a plan provides for salary reductions from employees’ paychecks for contribution to the plan (such as in a 401(k) plan), then the employer must deposit the contributions in a timely manner. The law requires that participant contributions be deposited in the plan as soon as it is reasonably possible to segregate them from the company’s assets, but no later than the 15th business day of the month following the payday. If employers can reasonably make the deposits sooner, they need to do so.

Note the words "as soon as it is reasonably possible to segregate them from the company’s assets". In recent years this has been taken to mean that if the employer is able to make deposits for other deductions on or w/in days of the checkdate, the 401(k) deposits should be made just as timely. As the quoted section says: If employers can reasonably make the deposits sooner, they need to do so.

[Kimberly S]

And if you go to the site, immediately below what Masteff has quoted they give an example using 5 days as the standard for depositing deferrals.

The match deadline is not usually as strict, but will depend on the terms of the document. It might be as late as the due date of the employer's tax return.

[JanetM]

They need to file 5330s and make up lost earnings on deferrals to correct. DOL web site has calculator to figure the lost earnings. The match does not receive lost earnings since you could - depending on the plan design - contribute the match September of the following year.

DOL calculator for lost earnings - http://www.dol.gov/ebsa/calculator/main.html

Then you need to train the employer to follow consistent practice of remitting deferrals. If the regular paychecks are issued every friday and routine is to make all other payments on Monday - Monday it will be - barring holidays and other reasonable delays.

[WDIK]

For what it's worth, it was mentioned at the Los Angeles Benefits Conference that a "safe harbor" deadline for segregating the deferrals is being considered by the DOL.

I would guess that it would be in line with the example on the website.