Timing of deposits

Client deposits deferrals/loan payments on their payroll date. This means deferrals are funded in one day

Plan will migrate to Empower ( formally Prudential) on 10/20

First payroll to be sent to Empower is 10/27

Issue - once the file is received, Empower will have a call with the client about the process to review and approve the file. This call will not take place until the file is received. Furthermore scheduling this call is first come first serve, so there is no idea when the first deposit can be funded.

Client is concerned the deposit will be 3 - 10 days later than the normal deposit date.

Client stated their auditors will flag the deposits as late

Question - Is there anything in the IRS/DOL guidance that grants a grace period for unusual circumstances?

Our client is a former auditor and she feels the deposits will be deemed late.

any thoughts?

There is no grace period.  There are a few thoughts:

• Try to work with Empower to preserve the next day timing.  We have been successful doing this if the conversion manager is knowledgeable and cooperative.  It works particularly well if the payroll file is transmitted the day before the payroll date so Empower can run their edits and validations overnight and you can fund the next day.  If the conversion manager does not know how to make this happen, complain to the Empower sales executive that made all of those wonderful promises about reaching Nirvana.
• The auditor does not have the authority to say when a deposit is or is not late.  The authority belongs to the IRS/DOL.  The auditor can disagree, but the Plan Administrator is signing the Form 5500 and answering the compliance question about late deposits.
• The client should be able to show they are funding as quickly as they can within the constraints imposed on them by the recordkeeper.
• If there is a change in recordkeepers and as a result there is a change in the timing of deposits from next day to 2-3 days due to the new recordkeeper's procedures, there likely will be no push-back from the IRS/DOL.  If there is, appeal it to the agents manager with a full explanation of the circumstances.  If the manager in intransigent, you could even take it to Tim Hauser, the Deputy Assistant Secretary for Program Operations of the Employee Benefits Security Administration (EBSA).  He says he wants to hear when the DOL is being unreasonable and his contact information is publicly available.
• If there is a late deferral as part of the transition process, the world will not end and any financial impact will be minimal.

Good luck!

Thanks.  We have already reached out to Empower and stressed the importance of preserving the timing of the deposit.

My feeling was the auditors may included the "late" payment in the management letter, but not make an issue of it for the 5500.  Need to talk our client off the ledge this is not a big deal.

Even if a delay might be unstated in a Form 5500 and otherwise not a big deal, a fiduciary that can work to push itself and its recordkeeper to prompt processing of contributions and other payroll payments should try to do so, if it does not detract from higher-order fiduciary responsibilities.

I like everything Peter and Paul wrote and add, although probably not needing to as you probably already would know, to document everything.