How long can they float my 401(k) funds?

[Guest MHerrick]

After I get verification to transfer my biweekly 401(k) contributions, I make a electronic transfer to our provider the evening before or the morning of the paydate. It is taking 5-7 days before the money is showing up in employee accounts to invest. How long do they have to credit my employees accounts? Is this spelled out in any reg. or ruling? Can anyone recommend a provider that will be able credit the accounts faster? Thanks.

[Guest Ron]

The timing of your contributions could depend on a number of things. Are you using a fed funds wire to transmit funding or an ACH debit? The ACH debit typically takes a couple days to settle after you send it, so that may be part of the delay. If you have multiple investment vendors, it may take the administration firm time to move money to the appropriate accounts.

However, if the provider is confirming receipt of your data, they should be able to invest your funds on the day that they receive them, or the following day, depending on the time that the funds get to the provider.

I am not aware of any regulations that would be applicable to this situation, but it just makes good business sense to find a provider that can invest your money in a timely manner.

Ron

[MoJo]

Assuming the assets are transfered into trust timely (DOL requires that tehy be transfered as soon as practicable, but in no event later than the 15th business day of the month following the month they are zapped from employee paychecks), then the issue is one of prudence. The trust must invest the funds prudently (ie make the assets productive). Most providers do this within 48 hours upon receipt of *good* data. Good data is defined as allocation data that balances to the amount of the contribution. You'd be surprised as to how many times the two are not in balance. That requires manual intervention, manual balancing, and correction of the records. In the meantime, assets aren't allocated to anyone's accounts (although they may be invested in a money market or some other liquid stable value fund, if the time to correct is excessive).