December 401(k) contributions

[Guest mkd*]

I will begin by saying that I am on the payroll, not benefit, side of things. Our 401(k) plan is going through the annual audit. Our last payroll of 2009 was paid on 12/31/09. We uploaded the file to our 401(k) TPA's website on 12/30/09, the same day we processed the payroll. Our TPA is responsible for initiating the ACH to our bank account to fund the contributions. They always take a few days to do this, so the ACH was not initiated until January 5, which is the day they credited the contributions to the employees' accounts. They are showing these contributions as belonging in 2010. Our auditors are now telling us that because of the mismatch between what we show on W-2s and what our TPA shows for the year, going forward we should not process any payrolls late in the year that our TPA cannot post within the same calendar year. Does this make any sense? Is the TPA required to show the contributions as belonging the year in which they received the funds from us? Or is this an error on their end?

[J Simmons]

I will begin by saying that I am on the payroll, not benefit, side of things. Our 401(k) plan is going through the annual audit. Our last payroll of 2009 was paid on 12/31/09. We uploaded the file to our 401(k) TPA's website on 12/30/09, the same day we processed the payroll. Our TPA is responsible for initiating the ACH to our bank account to fund the contributions. They always take a few days to do this, so the ACH was not initiated until January 5, which is the day they credited the contributions to the employees' accounts. They are showing these contributions as belonging in 2010. Our auditors are now telling us that because of the mismatch between what we show on W-2s and what our TPA shows for the year, going forward we should not process any payrolls late in the year that our TPA cannot post within the same calendar year. Does this make any sense? Is the TPA required to show the contributions as belonging the year in which they received the funds from us? Or is this an error on their end?

I think that the TPA could show this as for 2009.

[david rigby]

Is the TPA required to show the contributions as belonging the year in which they received the funds from us? Or is this an error on their end?

1. No.

2. Maybe.

[K2retire]

Our system requires the employer to tell us the payroll date (which includes the year). If no date is entered, it defaults to the current date, which may be the source of your problem. Ask your TPS how you are supposed to do this -- it is a common occurance so they should have a precedure.

[Tom Poje]

as for not 'processing' any payrolls made late in the year, the DOL has this idea that once deferrals are withheld from a person's paycheck, they must be deposited in a timely manner. Unless you are withholding the $ and depositing them somewhere outside the company, you would be crossing over into a very dark world. if the auditors wish to cover the fees involved all power to them.

It's optional whether to file a 5500 on an accrual or on a cash basis, based on what you indicated it sounds like the TPA is doing everything on a cash basis. (I will go out on a limb and guess they receive a download to import from the investment house, and obviously that doesn't include late December deferral depsoited in January.

Investments houses themselves handle things differently. I know John Hancock (goes back to the days of Manulife to show how old I am) waits until January whatever before issuing final reports for the year. So, despite the fact the contribution isn't deposited until January, it is still treated as being 'made' in the prior year. I'm sure there must be other investment houses that do the same.

[Bird]

I agree with the prior responses - basically, reporting can be done on a cash or accrual basis, and the auditor is way off base to recommend holding off on the deposit of deferrals for this reason or any other. Delaying a whole payroll is kind of preposterous, no?

While reporting may be done on a cash or accrual basis, I think it's a supremely bad job if someone, probably the TPA, doesn't reconcile at least the deferrals on an accrual basis and prepare the reports that way. Otherwise...well, you have the "otherwise" at hand.

[Guest mkd*]

Thanks for your responses. Our file to the TPA does include the pay date, so they should have no problem identifying what year the contributions belong to. Just wanted to clarify that the auditors are not suggesting holding the deferrals for longer than necessary, but the ARE suggesting accelerating or delaying pay days that may fall during the last week of the year, which I do find preposterous. Thanks for the clarification on the accrual vs. cash issue.

[oriecat]

Delaying a whole payroll is kind of preposterous, no?

Seriously! It is ridiculous to me to think that a 401k auditor thinks the payroll schedule will revolve around them. Companies have to pay based on their established schedule, what do they expect you to tell employees "Sorry, yes we should have our bi-weekly paycheck this week, but we can't because the 401k might not get posted on timely. See you next year."??