"Employee contributions were withheld on November 1, 2025. Plan sponsor submitted the allocation breakdown to the recordkeeper same day. The recordkeeper made an error and the funds were never deducted from the plan's sponsor's bank account or deposited into the participant accounts. The account shortages were caught by your friendly neighborhood TPA while reconciling the accounts. After numerous conversations, the
recordkeeper acknowledged their error.
"On June 30, 2026, the recordkeeper deducted the contribution amount from the plan sponsor's bank account, deposited the missing contributions, and backdated the deposit to November 1, 2025. The participants received the number of shares they would have received had the deposit been made on November 1, 2025. When calculating the earnings based upon the November 1,
2025, share values and June 30, 2026, share values, they amount to approximately $800.
"The recordkeeper is insisting that this is not a late deposit since they backdated and provided the proper number of shares. They don't believe this falls under SCP or VFCP. Due to the timing, I agree SCP doesn't apply because the correction didn't occur within 180 days of the withholding and the VFCP calculator wasn't
used to calculate earnings. However, I still believe VFCP is required because the withholding occurred on November 1, 2025, but the funds were not segregated from employer assets until June 30, 2026.
"Am I wrong here? I prefer to be wrong, but I still believe this would be considered a late deposit regardless of who made the error or how it was corrected."
