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Should my 401K contributions be 2 weeks behind being deposited into my 401K plan?

I see that salary employees guideline is the 15th of the following month. I can not find anything about hourly employees that give weekly contributions.

Aug 07, 2013 by Nicole from Joplin, MO in  |  Flag
7 Answers  |  9 Followers
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6 votes

Two weeks may be just about right. Probably not what you want to hear but the reality of the matter is getting money into each participant's account can take a while. I would not think much more than two weeks to be OK though.

1 Comment   |  Flag   |  Aug 07, 2013 from Kingsport, TN
cindy

i agree

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Flag |  Aug 08, 2013 near San Francisco, CA

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5 votes
Ken Krausman Level 9

Hi Nicole, As an addition to Andrew's answer, the Department of Labor did create a "safe harbor" for small plan filers (companies with less than 100 eligible employees) of 7 days from the date the contributions were deducted from the employees paychecks.

Comment   |  Flag   |  Aug 09, 2013 from Bloomfield Hills, MI

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4 votes

Nicole - you rock for even asking that question! I think John is on point. There is a lag time between your contribution and it showing up. If it is causing a problem, let your employer and plan provider know.

1 Comment   |  Flag   |  Aug 07, 2013 from River Hills, SC
Nicole

Thank you to everyone that responded!! I wanted you all to know that after some emailing to the folks in our 401K admin. that as of the 7th I am current. My money is now where it should be. Thanks again!!!

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Flag |  Aug 09, 2013 near Joplin, MO

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4 votes

Nicole, This is a very good question. The answer is according to government regulations the money needs to be deposited at the earliest possible date that your 401(k) contribution can be segregated from the company's account. They are required to deposit it by the 15th day of the following month after the month you made the contribution. This may be a little confusing but in general two weeks is reasonable. Sometimes it happens in a day or two but it can take longer.

Comment   |  Flag   |  Aug 08, 2013 from Leawood, KS

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3 votes
Peter C. Karp Level 20

Nicole,

Department of Labor rules require that the employer deposit deferrals to the trust as soon as the employer can; however, in no event can the deposit be later than the 15th business day of the following month. Keep in mind that the rules regarding the 15th business day isn't a safe harbor for depositing deferrals; rather, these rules set the maximum deadline. DOL provides a 7-business-day safe harbor rule for employee contributions to plans with fewer than 100 participants. If you are concerned about the delay due to deferring weekly you should contact your HR department and express your concern. If your company is not working with an experienced retirement plan advisor or third party administration firm to review plan governance and address concerns such as yours, you might suggest they contact us for assistance and a plan review.

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1 Comment   |  Flag   |  Aug 21, 2013 from San Francisco, CA
Ken Krausman

Thanks Peter! That is the definitive answer.

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Flag |  Aug 27, 2013 near Bloomfield Hills, MI

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1 vote

The delayed or "late" funding of salary deferrals and participant loan repayments is considered a "prohibited transaction" under ERISA and is one of the Department of Labor"s (DoL) top audit focus areas. The reason is that, once deferrals are "deemed" to be late, they become an extension of credit between the plan (the 401(k)) and a disqualified person (the employer). Essentially, it is as if the plan loaned the employer money from some or all of the participant accounts, which isn't really supposed to happen with 401(k) plan assets. So employers must then restore the late plan contributions along with any lost earnings on the money and pay excise taxes. This can also trigger plan audits as each instance must reported on Form 5500.

A period of two weeks to remit employee salary deferral contributions and participant loan repayments is actually NOT REASONABLE in most any circumstance. The DoL in on-site audits of retirement plans will typically look at one of the following: 1. If it is a small plan under 100 employees, they will be OK if the employer remits the money within the seven business day safe harbor period. 2. For large plans: a. What has the employer done in the past? Is there any consistency to the payroll submission process? If the employer consistently takes 2 weeks to remit deferrals and loans, while the DoL auditor will not be satisfied, they will likely at least note that the delay is not being done with the intent to harm participants. But it is still going to be identified as a an audit failure and need to be fixed. if there is no consistency to the process, the employer may be in more trouble, depending on the circumstances. The DoL may even elect to fine the employer for the prohibted transaction activity. b. How quickly does the employer remit their payroll taxes? Most employers remit payroll taxes to the federal government in about 24 hours. The DoL has stated in public forums that they believe that 401(k) salary deferrals shoudl be able to be remitted in the same amount of time as payroll taxes. So large employers taking more than 24-48 hours to remit deferrals will likely be viewed as a prohibited transaction.

I recommend you contact your HR or payroll department and let them know about the issue. They may be completly unaware of the DoL standards But they will need to improve their administrative processing standards to meet the DoLs expectations.

Comment   |  Flag   |  Aug 26, 2013 from Houston, TX

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0 votes

Andrew's response is what I would say.... regulations state the earliest possible date. Your employer is at risk if they hold your money for an unreasonable time; two weeks is reasonable.

Comment   |  Flag   |  Aug 14, 2013 from Delray Beach, FL

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