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[Griswold]

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[Peter Gulia]

The Form 5500 question asks: “Was there a failure to transmit to the plan any participant contributions within the time period described in 29 CFR 2150.3-102?”

Under that rule, a participant contribution (or a participant loan repayment) is a plan’s asset no later than “the earliest date on which such contributions or participant loan repayments can reasonably be segregated from the employer’s general assets.”  https://ecfr.federalregister.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-B/part-2510/section-2510.3-102

One might answer the Form 5500 question by interpreting the nebulous phrase “transmit to the plan” to focus on when the money left the employer’s control and was under the control of the plan’s trustee or its agent.

(Was the TPA the employer’s agent, or the trustee’s agent?  Or if the TPA was an agent of both, what exactly were the TPA’s obligations in the situations you describe?)

If the plan’s fiduciaries, including the administrator and the trustee, treated amounts paid to the TPA as plan assets, and the failures were that some amounts were not promptly credited to participants’ individual accounts, that might be a distinct breach.  If it is, the breaching fiduciary might owe restoration.  But it is not always and necessarily the same breach (and usually prohibited transaction) that calls for a Yes answer to the Form 5500 question quoted above.

[Griswold]

Thanks!

[Patricia Neal Jensen]

The rule is concerned with when the assets were no longer in the sponsor's control/ bank account.  I would argue that the transfer to the TPA (in this case) is the date to be concerned about and, if done timely, this is not a late deposit.

As an aside, I would not support transferring assets to a TPA.  There are a host of stolen asset cases where the TPA failed to transfer the correct amount of assets to the vendor holding the Participant accounts.  If the TPA is not crediting interest to assets it is holding, that is another potential problem.  Any delay in transferring assets to the investment accounts is a problem, maybe just a PR problem with Participants, but a problem nonetheless (Participants can see or find out when the assets were transferred to the investments and will not be "happy" if there is a delay caused by an administrative concern.)

[C. B. Zeller]

42 minutes ago, Patricia Neal Jensen said:

Any delay in transferring assets to the investment accounts is a problem, maybe just a PR problem with Participants, but a problem nonetheless (Participants can see or find out when the assets were transferred to the investments and will not be "happy" if there is a delay caused by an administrative concern.)

More than that - it's a fiduciary failure, as Peter alluded to. If the contributions are not in the participants' accounts then they cannot exercise control over them and you have a 404(c) issue. If the TPA or other intermediary can't get the money into the plan for a couple of weeks, let's say, and the market blows up in those couple of weeks, participants could sue.

[Luke Bailey]

I think the main thing the DOL was concerned with was the security of the assets (e.g., from creditors of the person holding the funds in the event of bankruptcy). I cannot see the original question for some reason, but it would seem to me that the requirement is for the money to be in the trust by the deadline, whatever it is, and that the employer has not fulfilled duty just by sending the funds to someone other than trustee. A set-up whereby the employer timely sends the funds (thereby losing the float for itself) and yet the money is not deposited in the trust seems...nonoptimal.

[RatherBeGolfing]

3 minutes ago, Luke Bailey said:

I think the main thing the DOL was concerned with was the security of the assets (e.g., from creditors of the person holding the funds in the event of bankruptcy). I cannot see the original question for some reason, but it would seem to me that the requirement is for the money to be in the trust by the deadline, whatever it is, and that the employer has not fulfilled duty just by sending the funds to someone other than trustee. A set-up whereby the employer timely sends the funds (thereby losing the float for itself) and yet the money is not deposited in the trust seems...nonoptimal.

The OP was something along the lines of ER releases contributions to TPA timely, but TPA for some reason takes X number of days (or weeks) before it deposits the contributions to the participant accounts, is this a late contribution for Form 5500 purposes?  

[Peter Gulia]

My suggestions yesterday, to a lawyer who will himself analyze the law and evaluate the facts, suggested one might consider when the money was under the control of the plan’s trustee or its agent.  With that suggestion, I invited Griswold to consider whether the TPA was the trustee’s agent.  And the context was only the narrow purpose of answering the Form 5500 question.

[Mike Preston]

Where did the op go?

[Luke Bailey]

22 hours ago, RatherBeGolfing said:

The OP was something along the lines of ER releases contributions to TPA timely, but TPA for some reason takes X number of days (or weeks) before it deposits the contributions to the participant accounts, is this a late contribution for Form 5500 purposes?  

I think then they would be late, RatherBeGolfing.

[Alonzo Church]

I  have dealt with auditors on similar questions where the deferrals are sent to the recordkeeper/trustee, but not allocated until later. In each case, the auditors were satisfied that there were not late contributions that had to be disclosed on the Form 5500 (and in the financial statement schedules).

If the TPA is not actually a trustee and the assets are not in trust -- you have a problem. Honestly, though, that problem would be with the way you have set the plan up.

[Luke Bailey]

4 hours ago, Alonzo Church said:

I  have dealt with auditors

Alonzo Church, you're talking independent CPA auditors, not IRS EP agents or DOL investigators, right?

 

4 hours ago, Alonzo Church said:

If the TPA is not actually a trustee and the assets are not in trust -- you have a problem. Honestly, though, that problem would be with the way you have set the plan up.

TOTALLY!

[Alonzo Church]

Luke --

yes, I was speaking of CPA firms. 

[Luke Bailey]

4 hours ago, Alonzo Church said:

Luke --

yes, I was speaking of CPA firms. 

OK. Thanks, Alonzo. I think a DOL investigator, or IRS employee plans agent, would be more concerned.