Switching Recordkept Platforms and Late Deferrals

[msmith]

Is there any exclusion to the late deferral deposit rule for Plans that convert to another product - and the new Recordkeeper will not accept contributions until the assets have transferred.

I have found nothing to indicate that the Employer is not subjected to the Prohibited Transaction rule - but the Recordkeeper feels otherwise.

[John Feldt ERPA CPC QPA]

A new recordkeeper that won't accept deferral money until the big money transfers. Huh, that's certainly one way to do business.

I think a 10-day extension from the reasonable segregation date might be available in limited situations. To obtain such relief, I think the employer must comply with some very specific requirements under the DOL regulations at 29 C.F.R. Section 2510.3-102(d). I think the requirements include a written notice to each employee and the employer obtaining a performance bond prior to the extension. Without looking this up again, I am not sure if this is still available after the January 2010 final regulations were issued.

I know of no other exception. I would probably ask the Recordkeeper to provide a citation to back up their position, or that they find a way to accept these deposits.

Absent their willingness to help out a new client, I would suggest they set up a local trust account in the name of the plan's trust. Deposit the deferrals timely into that trust. When the new recordkeeper is willing to accept those assets, run a valuation to allocate the earnings and send it in. You may have to consider the document, especially if the document spells out whether or not the participants get to direct their investments. Many plans merely make that an administrative decision for the Plan Administrator.

[K2retire]

Will the prior recordkeeper not accept it either?

[msmith]

I beleive the Client was provided with bad information. The assets have since transferred - but late deferrals date back from January 2014 to May 2014.

Thank you for your responses.