delinquent 401k deposit w/in blackout period & reporting

I know the answer but just thought i'd throw it out there.

company always deposits 401(k) on time. first 401k with new recordkeeper, despite best effort they couldn't get it through until past 7 business days.

I think we still need to report it but I feel like it's a reasonable period due to circumstances

To simplify, let’s assume the Labor department’s rule, Definition of “plan assets”—participant contributions, is a legislative rule that sets a binding interpretation of the statute.

Yet, that rule isn’t a bright-line rule.

Consider the rule’s general rule: “[T]he assets of the plan include amounts . . . that a participant has withheld from his wages by an employer, for contribution or repayment of a participant loan to the plan, as of the earliest date on which such contributions or repayments can reasonably be segregated from the employer's general assets.” 29 C.F.R. § 2510.3-102(a)(1). [Not my formatting.]

The subparagraph about the seventh business day is a safe-harbor way to show one met the general rule. Under this safe harbor, an amount so “deposited with [the] plan”—itself an ambiguous phrase—is “deemed to be contributed or repaid to such plan on the earliest date on which such contributions or participant loan repayments can reasonably be segregated from the employer’s general assets.” 29 C.F.R. § 2510.3-102(a)(2)(i). That safe harbor is not the only way to show adherence to the general rule. 29 C.F.R. § 2510.3-102(a)(2)(ii).

Even for an amount not yet credited to participants’ individual accounts, or even not yet collected in a bank account of the plan’s trustee or its custodian, a fiduciary might loyally and prudently act in a way that treats the amount as plan assets segregated from the employer’s assets.

The plan’s administrator might want advice about whether, considering the particular facts and surrounding circumstances, the participant-contribution amount was segregated from the employer’s assets as soon as that amount could reasonably be segregated from the employer's assets.

That an employer usually pays over participant-contribution amounts promptly and encountered a difficulty when adapting to a newly engaged service provider might suggest why what the employer did to segregate the participant-contribution amount from the employer’s assets was reasonable in the circumstances.

29 C.F.R. § 2510.3-102 https://www.ecfr.gov/current/title-29/section-2510.3-102.

The Form 550 Part V line 10a question is: “Was there a failure to transmit to the plan any participant contributions within the time period described in 29 CFR 2510.3-102?”

If a plan’s administrator decides to answer No on that question, it might make a contemporaneous record of its reasoning, to help show a sincere and prudent effort to report truthfully.

This is not advice to anyone.

Great comments.  To expand on Peter's comments, consider an example where there is a natural disaster (eg, tornado, hurricane) that interferes with the employer's normal business operations.  Governing agencies (IRS, DOL, PBGC) have a long history of providing "disaster relief".  One of the foundations of that relief is phrases such as the underlined one above.  Thus, the safe harbor described above is not the only method of compliance.