Deposit of Elective Deferrals

[BTG]

Has anyone seen any recent discussion on how the DOL is interpreting "the earliest date on which the contribution can reasonably be segregated from the employer's general assets" or what factors they look at? I have heard one factor is how long it takes the employer to remit FICA contributions. Any other relevant considerations that people have seen? Thanks.

Note: This particular plan is not a small plan eligible for the 7-day safe harbor.

[GMK]

Our understanding that it is as soon as practicable.

Here's an earlier thread:

http://benefitslink.com/boards/index.php?showtopic=38961

which links to:

http://benefitslink.com/boards/index.php?showtopic=22447

[BTG]

Thanks for the prompt reply. I agree that the standard is "as soon as practicable." Just trying to get a feeling for what people are seeing the DOL translate that to in terms of days, weeks, etc., or what factors the DOL is looking at in terms of determining what is "practicable."

We have a client that is considering switching to a new payroll system that would make the deposit of deferrals based upon regular pay faster, but would delay the deposit of deferrals based upon non-standard pay (bonuses, etc...) until about two weeks after it was withheld from pay.

Any thoughts on that specific scenario?

[masteff]

We have a client that is considering switching to a new payroll system that would make the deposit of deferrals based upon regular pay faster, but would delay the deposit of deferrals based upon non-standard pay (bonuses, etc...) until about two weeks after it was withheld from pay.

What is the reason why non-standard pay would result in a delay? Barring something that makes it signficantly different, then I'd say the timing for deferrals on regular pay sets the standard by which all deferrals should be deposited.

That said... if non-standard pay is an "off-cycle" and/or manual event and nearly impossible to report out separately from the next regular cycle, then you might have a case. For example, if I did a manual check today, the data would be added to the next payroll run and everything (FICA, deferrals, withholding) would be indistinguishable from my other report totals for that run (not to mention that FICA and withholding wouldn't actually be remitted to the govt until that run).

[Kevin C]

In my experience with DOL audits, the standard varies by investigator. We had one who insisted that if the deposit wasn't done the same day as the pay date, it was late. We had another investigator who prepared a spreadsheet on 18 months of deposits with the pay dates and the dates the deposits showed up in the account. They were mailing checks at the time. He calculated the average time and said any payroll that took longer than the average was late. We eventually got both of them to back down, but it was a royal pain. We've had others that took a more reasonable approach from the beginning.

In your case, I think the special payroll amounts being deposited two weeks after the pay date would be a problem.

[BTG]

Thanks, all... I appreciate the insight.

In response to your question, masteff, I'm not exactly sure about the reason for the delay on the non-standard amounts, but I suspect it probably relates to the off-cycle/manual issues you cited. I will have to look into that.

[MARYMM]

We have a client that is considering switching to a new payroll system that would make the deposit of deferrals based upon regular pay faster, but would delay the deposit of deferrals based upon non-standard pay (bonuses, etc...) until about two weeks after it was withheld from pay.

What is the reason why non-standard pay would result in a delay? Barring something that makes it signficantly different, then I'd say the timing for deferrals on regular pay sets the standard by which all deferrals should be deposited.

That said... if non-standard pay is an "off-cycle" and/or manual event and nearly impossible to report out separately from the next regular cycle, then you might have a case. For example, if I did a manual check today, the data would be added to the next payroll run and everything (FICA, deferrals, withholding) would be indistinguishable from my other report totals for that run (not to mention that FICA and withholding wouldn't actually be remitted to the govt until that run).

Aren't your payroll tax deposits for the manual checks technically late ? When I used a payroll service, my process for manual checks was the same as yours. Now I use an in-house system and when I do manual checks, I do additional tax deposits. I do wait to transmit the deferrals until the next regular bi-weekly payroll, though. So, I guess those could be considered to be late.

[Bill Presson]

We've had some clients recently involved in DOL audits. Both of the auditors have indicated that the standard for large plans is less than the 7 day safe harbor allowed for small plans.

FYI.