Electronic deposit of withholding

[jkharvey]

Now that we are required to submit the withholding deposits electronically, how are you handling the small plans with one or two of these a year? Are you requiring a separate checking account for the Trust? I realize that is probably the most "correct" route. Some administrators in our office are still having the employer take the withholding and deposit it for remittance and I am saying "no", you can't let the Plan money go back to the employer that way. Is there some exception for this withholding issue?

Thank you

[Bird]

We are handling the withholding through the IRS batch processing system; we maintain a separate bank account just for that purpose. It's generally not too difficult to get an investment provider to cut two checks, one to the participant and one to us, with a proper letter of instruction. Sometimes you need a guaranteed signature and sometimes you need special indemnification language, but you learn who needs what from experience.

Long story short, if someone has a checking account and it's not costing them anything to maintain it, yes, it's easier to have them cut the checks, but we're not insisting on it for new plans or making old plans get one.

[jkharvey]

Bird,

Thank you for replying. Do you mean that you as the TPA are receiving the checks and then depositing and submitting to IRS?

[Guest Jennyb473]

we set up the brokerage account on EFTPS and then submit the taxes on the EFTPS website as if we were the client and it pulls right from the brokerage account. Started doing that several years ago and it works great!

[Bill Presson]

We use Penchecks. The broker cuts the gross check to them and they make the distribution, tax withholding, 1099, etc.

Full disclosure: I have no financial interest in Penchecks, but I have known the guys that run it for a lot of years.

[Bird]

Do you mean that you as the TPA are receiving the checks and then depositing and submitting to IRS?

Yes.

As noted, Penchecks will do all of this for you if you give them a gross check. And if you don't have a personality disorder where you are compelled to do everything yourself, that is something to consider.