Is there a time frame when an employer has to deposit your payroll ded

[Guest KME]

I have heard ERISA says it should be 15 days after the end of the month of the paycheck. Where can you go for help with this if it is true and your employer does not respond?

[MWeddell]

The deadline is 15 business days after the end of the month in which a participant would have received cash but for the deferral election. Extensions are available under quite limited circumstances. Contact the local Department of Labor office probably.

[Guest Gary Tencer]

The correct answer is: ASAP, but even if that won't do, no later than 15 business days, even if you can't figure out the deposit. The Employer will be in trouble if he thinks the rule is 15 days.

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[Dave Baker]

Here is the Department of Labor regulation on the point:

http://www.benefitslink.com/erisaregs/403.shtml (click)

[Guest KarenW]

What are the consequences of depositing deferrals late? Do you answer 5500 question if only a few days "late", do you pay excise tax? do you offer a restoration payment when very late?

[Guest bswift]

karen, the late payment of deferrals causes a prohibited transaction excise tax issue. If you take the position that the pt is in the nature of a "loan" then the excise tax should be limited to the use of the money for the late period and not the principal amount of the deferrals that were late. The excise tax requires the employer to file a Form 5330 reporting the pt. good luck.

[Guest Paul McDonald]

I believe everyone has answered the question based on when the employer has to have the money segregated from the business and deposited with the plan in a plan account of some type..e.g..as simple as a plan's checking account. Any thoughts on the latest date the money has to be actually segregated/deposited/posted in or to a participant's account (assuming a participant directed investment program)?

[Guest JPCMPLS]

At a recent CLE program, a spokesman for the Kansas City Region of the DOL once again suggested that a timely segregation of the employee deferrals into an interest bearing account registered in the name of the trust would satisfy the regulatory plan asset requirement. Allocation to the participant accounts would need to occur as provided in the plan document (monthly, quarterly etc). He seemed to understand that most TPAs charge each time there is an actual allocation of contributions to participant accounts.

[Cathy from Chicago]

Are Section 457 plans also subject to the 15 day rule?

[Guest JPCMPLS]

Most 457 plans are exempt from ERISA as governmental plans. State law would apply to these plans. After 1998, 457 assets for governmental plans must be held in trust, but Notice 98-8 says that the DOL regs. do not apply to the timing of contributions. 457 plans sponsored by tax exempts, as top hat plans, would appear to be exempt from the ERISA funding requirements.

[k man]

Has anyone filed a 5330 excise tax return on this issue and been audited as a result?

[Guest JPCMPLS]

We have advised a number of clients to file the 5330 for these delayed deposits, as there is no statute of limitations for the late/non-filing penalties unless the return is filed. The DOL considers the delay to be a prohibited transaction (use of plan assets). We have never seen the filing of this return trigger an audit. In most cases, the excise tax (which in most instances,we believe is calculated based upon the lost earnings), is very small if the correction is made quickly. We have seen a response on the form 5500 that the deposits were made more than 30 days after withholding trigger audits, however.

[k man]

I dont see where the 5500 asks for the specific amount of days late. Is it on the 5330 and accompanying calculations?

[Guest JPCMPLS]

Question 4a on the new schedule I references the DOL regulation and asks whether all contributions were made within the required time period. The old forms had the 30 day question on them (1997-98 for example).

[Alf]

JPCMPLS -

What amount have you reported on the 5330s that you have filed? It the prohibited-transactions that is subject to the excise tax the amount of the late deposit or only the "interest" that would have applied to the loan of the funds as BSWIFT mentioned earlier?

[Guest JPCMPLS]

Alf - This depends on the facts of the case. Where the DOL has proceeded with criminal, in addition to civil charges, they take the position that there has been a misappropriation of assets, so the amount involved is the entire amount withheld. However, the government press releases in the mid 90's referred to late deposits as "corporate swing loans". I believe that the most analogous prohibited transaction is the "use of plan assets" for the employer's benefit. In the case of the use of money, the foundation excise tax regulations say that the amount involved is the difference between what was paid as interest and the fair market value for the use. In most cases no interest was paid, so the amount involved is usually the lost earnings. This is obviously much less than calculating the excise tax on the full amount. The PWBA investigators have occasionally taken a more aggressive stance on this, but without success.

[Guest Cindy Lambert]

Don't let the "15 business days after the end of the month" fool you. It must be separated as soon as possible to the Plan Trust. The DOL maintains final discretion regarding how soon the assets could have been separated. In 2000, I had my first client DOL audit regarding late deposits, and although the majority of the contributions had been deposited in a timely manner, the DOL determined that EACH contribution deposit could have been reasonably made within 4 days of the BI-WEEKLY payroll date. Their initial calculations of late days were made on the basis of calendar days, and I had to plea for them to reconsider the due date in terms of business days. Bottom line, the final audit took into account bi-weekly deposits over a 3-1/2 year period (back to the initial deposits of the plan), and all deposits made more than 4 business days were considered delinquent. "The sequel to my book" covers the joys of calculating restored earnings to the plan. (The really good news is that the accounts weren't participant-directed, which removed the whole ugly scenario of comparing rates of return among funds.)

p.s. there's not really a book......alot of notes, files, etc., but no book.....

[stephen]

Cindy,

I'd be interested to hear more regarding how the DOL calculated the "lost earnings".