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How soon does my employer have to deposit my contributions deducted from my pay into my 401(k) account?

Are there rules about how quickly it has to be deposited?

Apr 02, 2012 by Beverly from Aurora, CO in  |  Flag
4 Answers  |  11 Followers
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6 votes
james Level 9

Be warned do not use the 15th of the month as a safeguard. The view is as soon as administratively possible. If your plan is ever audited and you made a deposit the 4th day of the month then they will assume all deposits can be done that timely. The moral of the story is as soon as administratively possible and keep those deposit dates consistent.

View all 4 Comments   |  Flag   |  Apr 03, 2012 from Chapel Hill, NC
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3 votes
Jim Blankenship Level 17

Typically this deposit should be made immediately - after all, the money belongs to the employee. The latest date that the money should be deposited in the account is set by ERISA as "no later than the 15th business day of the month following the month that the employee contributions were withheld from pay."

jb

2 Comments   |  Flag   |  Apr 02, 2012 from New Berlin, IL
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3 votes

The guidelines state no later than the 15th of the month following withdrawal from pay, OR as soon as reasonably possible. I recently advised an employer that was making 401k deposits weekly as payroll was cut that wanted to switch to monthly deposits not to do so. The reason is that they had already established that weekly deposits were reasonable for them, so this employer would have to jsutify why weekly all of a sudden became unreasonable.

2 Comments   |  Flag   |  Apr 03, 2012 from East Dundee, IL
Mike

What should be done from an employee standpoint if the company only deposits funds once a year?

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0 votes
Herbert N Glass Level 18

The Department of Labor (DOL) has said in Regulations that they want 401(k) deposits of employees' money to be deposited within 7 business days following the payroll deduction. Their commentary is that the deposit should be made at the same time as other payroll withholding payments are made because presumably if withholding can be paid the participant deferral can also be made.

The DOL's motivation for their position is that they do not want an employing company to be able to use the employees' money as interest free capital In the operation of the company. Therefore, if an employer violates the DOL's Reg., the employer is obligated to make an additional payment to the plan of "lost earnings" that will be allocated to all affected participants.

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