Can a KSOP have late deferrals?

I'm just spitballing here, feel free to shake me out of the tree.

If the plan holds all the stock to the sponsoring company, then if late deferrals are still commingled with the sponsor's general assets.....

Assuming you have an operating company, corporate assets are not plan assets, so even if held by the employer whose stock is owned by the plan, the deferrals have not been transferred to the plan.

Yes, a KSOP can have late deferrals.

A simple example why it could matter.   Let's say the late deferrals aren't in the KSOP trust when the company declares bankruptcy the creditors of the company could get those assets that belong to the participants.   You could reply the stock will be worthless what does it matter?  I suppose that is likely but many KSOPs do have investments besides the comp any stock.   In fact most KSOPs I see don't put the deferrals into the company stock just the ER contributions but it doesn't always have to be that way. 

Besides when does the DOL care about logic?   The rules say get the deferrals into the plan by these deadlines so you better follow the rules. 

The way I understand it, the participant has cash withheld from their paychecks that then stays in the the employer's bank account.  The ER then uses that cash to purchase company stock and transfers that stock to the ESOP.

The DOL's rules try to ensure the ER does not keep that cash for longer than it should and turn it into plan assets as soon as it can.  So it really doesn't matter if the funds are in cash or co stock, it matte5rs who has control over the funds:  the company or the trust.

35 minutes ago, BG5150 said:

The way I understand it, the participant has cash withheld from their paychecks that then stays in the the employer's bank account.  The ER then uses that cash to purchase company stock and transfers that stock to the ESOP.

 

That might be the way it works but that would be rare unless the stock is publicly traded. 

More likely the cash is put into the KSOP and invested in mutual funds like a normal 4k as there are issues with using EE money to buy shares.   So in most KSOPs it really is just ER money that is being invested in the company shares.    In fact most of our KSOPs we help clients run are this way.   The EE money uses a platform to allow are the normal daily valuation functions you find in a typical 4k plan and it is the ER money that is being used on the "ESOP side" of things.  This is so much so you can almost treat them as two plans at the practical level even if they are legally a single plan.  Our 4k group takes care of the 4k side of the KSOP and our ESOP group takes care of the ESOP side of the KSOP.   It is only when you get to testing, 5500 and some other issues do we have to look real hard at what the one plan does. 

Or the cash is put into the KSOP and if company shares are being bought the EE money is used to fund the distributions of people leaving the KSOP.  The buy/sale of company shares is happening inside the ESOP.

However, the main point is still you have to follow the rules in terms of depositing the cash into the trust. 

The rest of this is just discussions of what you see happening in KSOPs for fun.