401K Investment transfer date limits

OK, partners, here is one of my very few questions asked on the forum!

I have recently realized that our 401K plan is not getting our employee deductions and accumlations applied to each account in a given time limit. I have attempted to search the web for the answer, but have not been able to find the exact limits. From our location the check was sent to the home office last week, a review of my personal 401K on-line this date, tells me January's deduction as not been applied to our accounts! Our CFO has responded to my e-mail on this matter that Month end close out for the company is not until the end of Feb 5, 2005, therefore, the corporate CFO has not sent the total amount as yet to the trust!

Legally, how long does a company get to play with an employee's deductions, when the employee is paid weekly and deducted weekly, but the company runs on a monthly accounting process?



  • 10 Comments sorted by Votes Date Added
  • the funds are to deposited to the employee's 401(k) account "as soon as practicable" after the funds have been segregated. there is no set time limit. some auditors take the position that deposits are to be made as soon as the deduction is made and others have allowed as much as 14 business days for the deposit to be made.

    Peyton Irby
    Editor, Mississippi Employment Law Letter
    Watkins Ludlam Winter & Stennis, P.A.
    (601) 949-4810
  • Thanks Mr. Irby, from my previous days as a securities sales person, I thought I remembered there was a given 7 day limit of time as reasonable in these electronic transfer days. I guess, I was incorrect and would best keep my return negative e-mail comment to our CFO under the keys on my keyboard.

  • Our company set up a new 401K plan eff 1/1/05 with a discretionary employer match of 50% of the first 6%.
    I deposit the employee contributions to their accounts on the same date as the pay date, so there is no delay. However, I've been instructed to deposit the employer match at the end of the month following the end of the quarter. I'm getting a lot of flack from employees regarding this. They feel the employer match should be done each pay day or at least on the last contribution of the quarter.
    Other than reviewing the SPD (which basically states the employer match is discretionary) how can I respond to these complaints?
    Many thanks.

  • The company I now work for has the technology to make deposits immediately. At my last, and much smaller employer, we worked off of the 14 day max. rule. This allowed enough time for payroll to submit the request to AP and for them to get the money to the investment broker for distribution.
  • P-

    I believe there is a reg that requires as fast as administratively possible but no later than 15th of the following month. Is my understanding that on audit, DOL will put the screws to the employer that pushes it right up to that deadline... I don't have cites handy, but I know I have seen this issue addressed repeatedly in other research.

    My company deposits same day as payroll. (our payroll service downloands file to 401k provider and provider then takes EFT transfer from our account same day). If you are using major service providers, it can be done easily.

    good luck - they are banking on your money and that sounds like crap to me.
  • We are paid weekly but have monthly accumulators so that we are able to determine the employee deferral and matching amounts. We have 15 business days (from the last payroll of the month I think or the end of the month probably) to get the funds into the account. This is IRS ruling. You can always ask them.
    We have recently gone through an IRS audit and they didn't say a thing about how we do this. Normally our deposits go through by about the 10-15th of the following month.
    E Wart
  • I'm assuming all of the comments relate to employee contributions, not matches. If I'm not mistaken, the employer has almost a month after plan year end to make the annual match. I could be way wrong on that, but at my last employer, I recall them dilly dallying around for a month or more before making the match. To me, that money is just as much mine as my money is since there is a contract giving it to me on a certain basis. Then, for the employer to mess with it and not have it accumulating in MY account, ought to be illegal.
  • Our company makes the match and profit sharing contribution after the end of the year also, even though we know how much the match should be. Today is Feb. 9 and the money is not yet there. (At our company an employee must be employed on the last day of the year to receive profit sharing or match money for the year.)

    As for the employee contributions, they are sent in on a monthly basis and we can usually see them in our accounts between the 10th & 15th of the following month.
  • How do you spell Bernie Ebbers' accounting staff? Lots of employers and all banks mess with people's money any time they can get there hands on it. Some plans to not match until the end of the plan year, which could be any given month end, depending. Then they get to delay till the end of the quarter following the plan year end. I know my last one did since I was the administrator. I'm no accountant, but I imagine the employer set the match money aside quarterly and benefitted from that and had it grow for his benefit, then matched on the last possible day he legally could. Since the annual audit is done by accountants hired by the owner of the business, they have no incentive to criticize this sort of manipulative process.

    I see the almost-vacant Worldcom headquarters building almost every day of the week.

    Disclaimer: This message is not intended to offend or attack. It is posted as personal opinion. If you find yourself offended or uncomfortable, email me and let me know why.
  • I guess we're lucky. We take deductions each week, make our match and send the checks weekly to CA. By the time the following pay period comes, EE has his share plus our match (since we're safe harbor, they're vested immediately) in their fund earning $$.

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