Hi. I recently opted into our 401K plan. My last paycheck was on 4/11/08 (and covered the period 3/22/08 - 4/4/08). That check showed the deduction of money toward my 401K. As of today, April 18th, my 401K benefits account still shows a $0.00 balance.

My question is this: How long does an employer have to deposit earned money into the employees 401K plan? Can they sit on it for a week, 2 weeks, (or longer?!) before transferring it to the employees holding account?

Signed -
LOSING INTEREST!
:(

Assuming that the rule has not changed recently, the rule is "withholdings must be deposited as soon as segregable but no later than the 15th business day of the month following withholding."

They are required to make such transfers "as soon as possible" and I believe the outside limit is 15 days, though I could be wrong - it might be 30. 7 days is well within the legal timeframe.

Having been in the position of making such deposits, I can tell you that it is not a fast and easy process. For a large employer, getting all the various employee's contributions to balance, allowing for changes to their withdrawals that might have transpired, loans they may have taken, and a few other logistical issues completed is not easy to complete even in the two week time frame. Not to mention that it takes some processing at the other end, too, once it's cut. It's not just cutting a check for your withdrawals and making a bank deposit to your account.

I have worked for some pretty big employers and 1 calendar week was what we used. We were audited by IRS pretty frequently, the potential for huge 401(k) penalties being what they are, and IRS never raised that as an issue. However, 401(k) is complex and this is something that is easier for a large company with good automation and dedicated staff to do. An argument could be make that it would be harder for a small company with limited staff to handle this task quickly. My first 401(k) in the 1980s was very spreadsheet intensive and took a lot of work to prepare the package for the trustee. They had a really ugly employer match that vested immeadiately which meant that it had to be funded immeadiately. More recent employers with many times more employees were actually much easier to prepare the package because the automation was much better and because these employers made a point of having simple to follow 401(k) rules, mostly to keep the auditors at distance, not because they cared about the people who had to prepare the packages.

Small employer, or big employer with outdated systems, the point is that it's not a process than can be guaranteed an immediate response.

Assuming that the rule has not changed recently, the rule is "withholdings must be deposited as soon as segregable but no later than the 15th business day of the month following withholding."

Is this also true for a TSA? If it is could you please tell me where I can find these rules. Thank you

http://www.irs.gov/pub/irs-tege/pub4531.pdf

http://www.irs.gov/retirement/article/0,,id=135260,00.html

Thank You very much. It's nice to be part of a message board that is ran by knowledgeable people. Thank you again!

Thank you for the response & clarification.

I am waiting on the deposit/transfer into my 401K from my paycheck dated 4/25/08 (covering the period 4/5/08 - 4/18/08). Assuming the deadline to be the 15th day of the following month, what happens should they not meet that deadline?? :confused:

That depends. IRS sometimes audits 401(k) plans. I have worked for employers who have had IRS doing this every 3 years or so like clockwork, and I have worked for employers who have been fined for violations. I cannot say as a fact that IRS will certainly audit your company or that IRS will certainly fine your company (should a fine be indicated). I can say that it is a real possibility. A company I was working for in the 1980s took a $250K hit for what were arguably minor technical violations.

Past that, 401(k) is subject to a law called ERISA (mostly retirement related), and that law is mostly administrated by federal DOL. I do not really know how IRS and DOL divide this up, but I suspect that if you wanted to get your employer in trouble that talking to federal DOL would get the ball rolling.

http://www.dol.gov/dol/topic/health-plans/erisa.htm