small plan deferrals deposited in a timely manner but unable to allocate due to payroll breakdowns not being submitted

I've found a few posts related to this question but not a clear answer and it's nowhere to be found in the regs. Any advice would be helpful.

We are a TPA and have a small client that deposit payroll in a timely manner (within 7 business day). However, they are always late in providing the payroll file/breakdown. There has to be some type of ramification for not being able to invest the participant's deferral in a timely manner. We've researched and can't find anything to send to the client to let them know about penalties they would incur for not providing the payroll files timely.

thank you both! This is what I was looking for, to somehow inform the employer that they have some sort of liability for not providing the breakdowns timely and therefore not allowing us to invest the monies into the participants accounts. ERISA 404(c) failure is what we hadn't thought about. Thank you again!

On the issue of a 404(c) failure.  I'd argue that the money is not actually subject to participant direction until it's allocated to their accounts.  In the meantime, the investment fiduciary would be responsible for investing it prudently, with no 404(c) protection, of course, for the contributed money pending allocation.  Some sort of cash fund should be prudent for a short holding period until a formal allocation can be made to participant accounts.  This sort of situation highlights the sloppiness of how plans are drafted and how they are actually run by the recordkeeper and how employers participate in the process, or not.  I say this without, of course, seen this particular plan document or otherwise knowing all the actual facts of the case.  I expect it is also somewhat of a consequence of the DOL's hands-off approach to participant directed plans.  A good, final solution for the recordkeeper would be to fire the client.