Can an employer deposit 401k early?

[TBob]

I know the DOL's rules on deposit timing and the safe harbor, etc. What are the ramifications / issues if the employer deposits the 401(k) contributions before the actual pay date for the employees?

[401king]

I know the DOL's rules on deposit timing and the safe harbor, etc. What are the ramifications / issues if the employer deposits the 401(k) contributions before the actual pay date for the employees?

Nothing to cite, but we had to look it up once and it was determined that it would be considered an employer contribution if funded before the paydate.

[Kevin C]

If the company pays in arrears, it is rarely a problem. The problem rule is in the 401(k) regs where it describes the requirements for a CODA.

1.401(k)-1(a)(3)(iii)©Contribution may not precede services

(1)General rule.—

Contributions are made pursuant to a cash or deferred election only if the contributions are made after the employee's performance of service with respect to which the contributions are made (or when the cash or other taxable benefit would be currently available, if earlier).

(2)Exception for bona fide administrative considerations.—

The timing of contributions will not be treated as failing to satisfy the requirements of this paragraph (a)(3)(iii)© merely because contributions for a pay period are occasionally made before the services with respect to that pay period are performed, provided the contributions are made early in order to accommodate bona fide administrative considerations (for example, the temporary absence of the bookkeeper with responsibility to transmit contributions to the plan) and are not paid early with a principal purpose of accelerating deductions.