Late Deposit

[Randy Watson]

Plan sponsor wires elective deferrals and loan payments to the trust within 7 days. The wire does not show up on the trust's statement until a day later. There was a footnote in the preamble to the old plan asset regulations that stated the Department was of the view that amounts were considered to be segregated from general assets on the day the check was mailed. It seems like the same would be true for amounts wired to the trustee, but the focus in the new regulations is on the date the amounts are "deposited".

Has anyone had to deal with this issue of remittance vs. deposit under the new regulations?

[david rigby]

Are you suggesting there is a difference in payment date for "wired" versus "mailed"?

[Randy Watson]

Are you suggesting there is a difference in payment date for "wired" versus "mailed"?

I think they're one in the same, but I'm wondering if the DOL still takes the view set forth in the footnote of the 1996 regulations.

[mbozek]

Plan sponsor wires elective deferrals and loan payments to the trust within 7 days. The wire does not show up on the trust's statement until a day later. There was a footnote in the preamble to the old plan asset regulations that stated the Department was of the view that amounts were considered to be segregated from general assets on the day the check was mailed. It seems like the same would be true for amounts wired to the trustee, but the focus in the new regulations is on the date the amounts are "deposited".

Has anyone had to deal with this issue of remittance vs. deposit under the new regulations?

The date the wire transfer shows up on the trust statement not usually the date the funds are received by the trust. Most banks, mutual funds, etc, do not post a transfer to the client's account until the following day or even later due internal systems, operations or investment procedures. Need to check trust rules for posting deposits.

If the funds were received by the custodian on the 15th the funds will show up on the records of the trust on the 16th b/c posting usually takes 24 hours. It could take more. In one fund co. IRA contributions wired on April 15th are not posted to the account until Apr 16 for investment purposes but for record purposes the funds are received on the 15h.

Does the employer have documentation of the date the funds were sent?

[Randy Watson]

Plan sponsor wires elective deferrals and loan payments to the trust within 7 days. The wire does not show up on the trust's statement until a day later. There was a footnote in the preamble to the old plan asset regulations that stated the Department was of the view that amounts were considered to be segregated from general assets on the day the check was mailed. It seems like the same would be true for amounts wired to the trustee, but the focus in the new regulations is on the date the amounts are "deposited".

Has anyone had to deal with this issue of remittance vs. deposit under the new regulations?

The date the wire transfer shows up on the trust statement not usually the date the funds are received by the trust. Most banks, mutual funds, etc, do not post a transfer to the client's account until the following day or even later due internal systems, operations or investment procedures. Need to check trust rules for posting deposits.

If the funds were received by the custodian on the 15th the funds will show up on the records of the trust on the 16th b/c posting usually takes 24 hours. It could take more. In one fund co. IRA contributions wired on April 15th are not posted to the account until Apr 16 for investment purposes but for record purposes the funds are received on the 15h.

Does the employer have documentation of the date the funds were sent?

Yes they do. Nevertheless, the DOL agent is making an issue of the delay. Perhaps this is an inexperienced agent.

[mbozek]

You need to reach out to the trust/bank and get their procedures for posting funds to plan accounts. Then get them to send an email or letter to you explaining why the funds are posted to the plan's account on a date later than they are received. I am sure thay have had to answer this question before. Financial firms are very conservative in recording the the date that funds are deposited to an customer's account to prevent the fund co. being required to pay off a customer whose $ transfer were received by the fund Co. but not actually deposited in the customers fund /account until a later date. For example, a wire transfer is received by a mutual fund for investment in a client's account in XYZ fund on May 15 but the funds are recorded internally by the MF company as cash on that date. On May 16 the fund share price doubles but the funds are deposited in his account as purchasing XYZ on May 16 at the 2x price.

A separate issue is that wire transfers need to be received by a certain time, e.g., 4pm est in order to be credited as received on that date. I know one financial firm that requires that Roth conversion requests must be received by 2:30 each day to be credited as a transfer for that day.

[Randy Watson]

You need to reach out to the trust/bank and get their procedures for posting funds to plan accounts. Then get them to send an email or letter to you explaining why the funds are posted to the plan's account on a date later than they are received. I am sure thay have had to answer this question before. Financial firms are very conservative in recording the the date that funds are deposited to an customer's account to prevent the fund co. being required to pay off a customer whose $ transfer were received by the fund Co. but not actually deposited in the customers fund /account until a later date. For example, a wire transfer is received by a mutual fund for investment in a client's account in XYZ fund on May 15 but the funds are recorded internally by the MF company as cash on that date. On May 16 the fund share price doubles but the funds are deposited in his account as purchasing XYZ on May 16 at the 2x price.

A separate issue is that wire transfers need to be received by a certain time, e.g., 4pm est in order to be credited as received on that date. I know one financial firm that requires that Roth conversion requests must be received by 2:30 each day to be credited as a transfer for that day.

Very helpful. Thank you.