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Delay in 401(k) withholding deposits
Old 09-08-2013, 11:02 AM   #1
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Join Date: Aug 2004
Location: St. Louis
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Delay in 401(k) withholding deposits

I tried searching both this forum and the internet, but can't find a specific answer. I'm hoping the vast experience and collective wisdom of the board can help out.

My employer has about 140 people participating in the 401(k) (hence, not a "small business" for 401(k) deposit rules).

The Department of Labor requires that 401(k) elective deferrals from an employee's paycheck - for a 'large plan' over 100 participants - be deposited into the 401k account "as soon as the funds are segregable" from general company funds...but under no circumstances is it to be later than 15 business days of the month following when the withholding takes place. If the delay is longer than this, interest is owed to the employee's elective deferral for the undue delay.

My question that I can't an answer to is this: Say the pay period is twice a month: the 15th of the month, and the last day of the month. Paychecks are received about 10 (calendar) days after the end of the pay period.

Regarding the aforementioned absolute delay maximum, does "15 business days of the month following when the funds are withheld" mean it's in the month immediately after the end of the pay period, or the month following when the paycheck is received by the employee?

For example:

Pay period ends 7/31/2013. Paycheck received 8/10/2013.

Does the DOL maximum "15 business days" end 8/21/2013 (going by the pay period ending date) or is it 9/20/2013 (going by 'the month following when the funds are withheld', using the date the paycheck is received)?

I believe my employer is really running afoul of the DOL maximum delay guidelines, as there are already 2 violations on 401k deposits this year, even if you use the most generous interpretation of the above deadlines. Even more damning is that I participate in the HSA elective deferral - they process the HSA deposit 1-3 days after my paycheck is received, but their 401k deposit is MUCH later.

Attached is a summary showing the end of pay period, the 401k deposit date/lag time, and HSA deposit date/lag time.

From Googling, the DOL apparently would look at that record and say "well, many weeks you were able to segregate the 401k elective deferrals funds and transfer into the 401k after just 12, 14, or 16 calendar days after the end of the pay period. Sometimes as little as 6 calendar why does it take you an average of over 30 calendar days most of the time?" (answer: employer is using the 401k deposit as float to reduce their short term loan funding)

I might contact the DOL for an inquiry, given the insane delay. I know that the DOL protects employees from being terminated for questions to the DOL regarding 401k withholding, but am also thinking of sending out my resume anyway (employer has been on the downhill for the past 4 years), so not really too worried if I get the axe for some BS reason which just happens to co-incide with my DOL inquiry, since I think there is a good case for undue 401(k) deposit delay.

Any comments either agreeing or disagreeing with my interpretation of DOL requirements? Anyone have a similar experience?
Attached Files
File Type: pdf 401k contributions.pdf (25.9 KB, 7 views)
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