401(k) deposit check lost in mail, ultimately late, can it be excused?

[TPApril]

As I much as I know the answer to my question, I thought I would throw it out there for any comments...

Small company has never deposited 401(k) late. In 2011, one check was lost in the mail and no one noticed it until reconciling year end accounts four months later (there were three payrolls that month so everything appeared normal on quick glance). So contributions were late and now must be reported on 5500, and lost earnings restored to trust. My question is - is the company's record of having written the first check enough to not treat it as a reportable late contribution?

[ETA Consulting LLC]

That's a good question. You know, many rules are written that "never anticipate" something honest happened to cause what appears to be a potentially blatant failure (I say this term lightheartedly). It appears to be a judgement call in this instance and the importance of retaining your documentation in identifying the however you deal with it can't be expressed enough.

With that said, I would err on the side of conservatism (depending on the amount of earnings). Arguably, there is some responsibility to the organization to ensure the check sent to the trust was actually negotiated (as to not wait until the trust and payroll are reconciled at year end). Again, this is merely one argument.

I just don't know if I would treat it as a situation where the deposits were not timely separated from employer assets. I would appreciate the arguments to the contrary, but would typically attempt to mitigate the risks when possible.

Good Luck!

[TPApril]

In a sense then, there is an argument to not report it, but the reality is they didn't necessarily do their due diligence on their end to make sure it was deposited.

I would add to the information above that total late deposit is $399 and lost earnings to current are $4.99.

[Belgarath]

Without opining on whether or not is is a "good" or "valid" risk, I can tell you what most people I know would do: they would just correct it with the 4.99 and neither worry about it nor report it. And take their chances with explaining it upon audit.

On the other hand, maybe this just means I hang out with bad people.

[austin3515]

Why not just report it, nothing every comes of these disclosures anyway (Ok, maybe a form letter inviting you into VFCP). But it's not like if you put it on there the feds are going to show up in haul you away

[MoJo]

As I much as I know the answer to my question, I thought I would throw it out there for any comments...

Small company has never deposited 401(k) late. In 2011, one check was lost in the mail and no one noticed it until reconciling year end accounts four months later (there were three payrolls that month so everything appeared normal on quick glance). So contributions were late and now must be reported on 5500, and lost earnings restored to trust. My question is - is the company's record of having written the first check enough to not treat it as a reportable late contribution?

Not to be a stickler for detail, but the requirement is that the funds are "segregated" from the employer's account in a timely fashion (and failure to "invest" may be a breach of another stripe). What account was the check drawn on? Is it arguable that the funds were segregated timely (but not necessarily invested timely).

Just sayin'....

[K2retire]

Not to be a stickler for detail, but the requirement is that the funds are "segregated" from the employer's account in a timely fashion (and failure to "invest" may be a breach of another stripe). What account was the check drawn on? Is it arguable that the funds were segregated timely (but not necessarily invested timely).

Just sayin'....

Particularly since they were both segregated and out of the employer's control on a timely basis.

[austin3515]

I think it's debatable whether or not merely writing a check actually segregates it. I think the actual funds would have to move.

To me, this is not the kind of thng that warrants "pushing the envelope" or taking an "aggressive" position. You're doing lost earnings, correct? It's irreconcilable to me to do lost earnings and not report them as late.

We've done LOTS of these over our client based due to cpa audits, missed deposits, etc. I cannot think of a one situation where something actually came of it. (now if the participant's call and complain, that's a different story altogether).