Late deferral Deposit and VFCP application

[AdKu]

Suppose the  record keeper received employee deferral  contribution through wire after the trade for the week was completed.

And the record keeper waited the next trade to deposit the deferral contribution in to each employee deferral accounts.

How should it be treated the days elapsed between employee deferral contribution received and deposited in to each employee deferral account for VFCP application and lost earnings purposes?

 

[MoJo]

Was the wire sent "timely"?  The rule is that the money must be "segregated" from corporate assets in a timely matter.  When the money is allocated is a different matter entirely (and is really a fiduciary matter - which in the scenario you posit doesn't - IMHO - rise to the level of a breach).

[AdKu]

Yes, for the most part the wire was sent on each pay date but some times participant level breakdown doesn't get to the record keeper 2 or 3 days later.

What does IMHO stands for? Forgive me for my lack of knowledge.

 

[K2retire]

5 minutes ago, AdKu said:

What does IMHO stands for? Forgive me for my lack of knowledge.

 

In my humble opinion

[AdKu]

 Do the majority in this forum holds the same opinion as MoJo?

If so, how would you rectify this type of breach?

[RatherBeGolfing]

3 minutes ago, AdKu said:

 Do the majority in this forum holds the same opinion as MoJo?

If so, how would you rectify this type of breach?

Absolutely.  From your facts, the assets were segregated from the ER assets timely, so there are no late deferrals.  It also sounds like a short administrative delay before the assets made it to the participant accounts.  It is a matter of a few days correct?  I don't see this as a fiduciary breach either.  

[Bill Presson]

1 hour ago, AdKu said:

Suppose the  record keeper received employee deferral  contribution through wire after the trade for the week was completed.

And the record keeper waited the next trade to deposit the deferral contribution in to each employee deferral accounts.

How should it be treated the days elapsed between employee deferral contribution received and deposited in to each employee deferral account for VFCP application and lost earnings purposes?

 

I don't see this as a late deferral issue. But why is the record keeper only doing one trade a week?

[AdKu]

 

RatherBeGolfing, you're correct it was a matter of a few days because of a weekly trade.

Bill, I really don't know why the record keeper only do one trade a week.

Are there requirements to state this few days administrative delay in VFCP application narrative?

[RatherBeGolfing]

15 minutes ago, AdKu said:

 

RatherBeGolfing, you're correct it was a matter of a few days because of a weekly trade.

Bill, I really don't know why the record keeper only do one trade a week.

Are there requirements to state this few days administrative delay in VFCP application narrative?

Since it is not late deferral, what eligible VFCP transaction would you submit it under? 

Looking into WHY the RK did what it did, and if it will continue to do it that way (and if that is a potential recurring problem) is probably the more pressing issue.

[AdKu]

 

To begin with, there were later deferral transmissions that I needed to correct using VFCP application. In the process I have also learned that couple of deferral transmissions  were administrative delays for a few days.

As far as why RK does what it does, I was explained that in a small RK environment once a week trade is very practical.

Do the majority in this form think this administrative delays  is uncommon must be once for all ? 

[BG5150]

Do the Trustees believe that once a week trading is prudent for this group of participants? Especially with the amount of platforms that allow for daily transactions.

(separate issue than yours, I know, but they may want to look into it.)

 

[RatherBeGolfing]

1 hour ago, AdKu said:

To begin with, there were later deferral transmissions that I needed to correct using VFCP application. In the process I have also learned that couple of deferral transmissions  were administrative delays for a few days.

In this context, you could probably include the "delayed" deferrals in your correction of late deferrals since you are already making corrections.  

 

1 hour ago, AdKu said:

As far as why RK does what it does, I was explained that in a small RK environment once a week trade is very practical.

This doesn't sit right with me.  It may be practical for the RK, but not for the most plans and participants. A short delay from the ER could cause a long delay before it gets to the participant because of timing with the RKs "practical" procedures. 

[ESOP Guy]

1 hour ago, AdKu said:

Do the majority in this form think this administrative delays  is uncommon must be once for all ? 

I am the first to admit daily 4k has never been my specialty.  I have however worked for TPAs that have daily 401(k) practices and what I can tell you is the tech to allow daily trades has existed since some time in the mid to late '90s regardless of size. 

Once the internet got to the point you could upload deposits quickly and easily the idea trades  didn't happen within the next business day they had the funds seems unusual to me. 

[Luke Bailey]

I'm not sure we have enough facts to know what the answer is. Does "the  record keeper received employee deferral  contribution through wire" mean that the funds were deposited in the plan's trust? If so, then I would agree that there's no late contribution. Further, if the funds were deposited in the plan's trust after the close of trading for the day and promptly traded at the market open on next day, then would seem like the recordkeeper's practice is also appropriate. Perhaps, however, if the plan were large enough the funds could have been aggregated and invested overnight in some very short duration deposit. If so, then there could be a problem. More importantly, if the recordkeeper received the funds and did not deposit into the plan's trust until the next day because it was too late to trade them on the day of receipt, I don't think that is appropriate.

[ERISAAPPLE]

I agree with Luke and the other posts.  It sounds like this is not a late deferral issue.  Rather, it sounds like a fiduciary duty issue with the investment.  What happened to the money once it hit the trust?  Was it invested or did it just sit in the account in cash?