Late 401(k) deposits & Payroll date

[TPApril]

Payroll is based on the 15th of every month, but paydate is actually the 20th. For reviewing whether 401k deposits are late, is it correct that we would use the 20th since that is the actual date the monies are separated?

[BG5150]

Use the check date.

[401king]

I think the safe harbor rule says something to the effect of "7 business days of the date it would have otherwise been paid to the employee." So, the paydate.

[TPApril]

Another simple question - does an owner pay lost earnings on his/her own late 401(k) deposit?

[ESOP Guy]

Yes the owners account gets lost earnings.

[Guest Pippy]

A large 401k plan pays weekly and semi-monthly; however, they only submit 401k deferrals and loan payments on a monthly basis. The TPA involved said they were fine to do this since they claim they're segregating the participant assets from the general assets of the employer. Their auditors have not asked them to make up earnings on the late contributions.

Since the employer is stil holding the assets, it is my understanding that this would constitute a prohibited transaction since the assets are not in the participant accounts. Who is correct? Me or the TPA?

Thanks!

[chc93]

If the deferrals and loan payments remain in the employer assets accounts, then you are right.

If the deferrals and loan payments are actually segregated into a separate plan trust account, then the TPA is right. The only requirement is to segregate the assets, not necessarily deposited to participants accounts within the timeframe. Of course, depositing to a plan trust account, but not depositing to participants accounts for them to invest may raise other issues.

[ESOP Guy]

CH93 is correct. You need to find out what they mean when they say they have segregated the assets.