Employer rules retirement contribution deposits. Advice?

[Boglemama]

My husband's employer regularly deposits our retirement contributions into our accounts later than I would like. He gets paid on the last day of the month, and today is the 15th (14th transactions showing on Fidelity's webpage). Our withdraws from his paycheck from February 28 still has not posted to our accounts. I have asked his payroll about this in the past, and they poo poo me by saying that they have until the 15th to make the deposit. I have read the Department of Labor rules and it says that the employer should deposit as soon as possible, but they have a window of until the 15th. It seems to be a trend that our deposits are always later when the market is up, and sooner when the market is down.

I hate to say anything to the DOL, because I'm sure that his employer will know who spoke up. I hate them having our money for 2 weeks and not knowing what's going on with it. Any advice?

[WHL]

While I highly doubt your contribution timing theory is correct, why wouldn't you be happy about that? If they're putting the money in ASAP while the market is low, you're getting more shares for your dollar.

Maybe the company is trying to help with your long term planning!

Oh, and to answer your question: if the law says they have until the 15th, you have no room to complain. Deal with it or get a new job

[Boglemama]

From your considerate and thoughtful tone, you must be a therapist.

Our contributions go in quickly when the market is low, and are delayed when the market us up. I have no idea why. It's just always been like that. It's frustrating for an employer to have thousands of your money in limbo for weeks.

[TomatoTomahto]

I must say that I don't understand why you're bothered. They're not doing anything illegal, according to you. Perhaps they're trying to time the deposit for their own account; it will probably not affect the final balance all that much, but if they're within the legal boundaries, what's the problem? I'm not trying to take a provocative tone, I honestly and truly don't understand your concern.

Ps I don't know about WHL, but I'm not a therapist.

[TomatoTomahto]

Pps
There are some HR practices at my wife's employer that bug me, but I don't think it appropriate for me to bring it to the attention of my wife's employer. Jus' sayin'

[Boglemama]

I handle the finances, and the employer has bungled some things in the past so I have to stay on top of them. Also, since they buy our shares when the market is UP, we are paying more for the shares. Who would like to do that?

The fact is that the law reads that they need to make the deposits as soon as possible, not 2 WEEKS after they get our paycheck money. They are given the date of the 15th as a window, but they are not supposed to repeatedly use it. How about I hold some of your money for 2 weeks every month without giving you interest?

[terpfan122]

Your lucky. My wife's employer funds her simple IRA on the last day of the next month. So, they have some of her money for 6 weeks before we get it

[sscritic]

Be glad you don't get paid on the first.

[Sam I Am]

If the company's actions are within the law, I'd say you have done what you can. Are the deposits accurate, when finally credited?

As well, how long does Fidelity have the money before it is credited, perhaps they chew up a few days as well.

But, stop a minute and think: Why on earth would the company care what the markets are doing? What advantage would it be for them?

There are many issues in my life I don't like, but I've had to accept reality, as well. I use to get my check from MetLife much earlier in the month, now it drops at the very end of the month. Ahh, the absolute precision of electronic deposits! Same with my SSDI check, MIL gets her SS first of the month, mine is near middle. I know why, but it just ain't fair! Wah!

BTW, does the company offer a match? If not perhaps you could use an IRA, where deposits could be made exactly on your schedule.

While this is annoying, I'm sure; if this is the worse thing the company is doing today, given cutbacks, wage freezes, added cost of benefits, etc., I'd consider myself fortunate. My retirement pension was frozen in 2006. Fortunately I am fully vested, so it didn't hurt.

Sam I Am

[TomatoTomahto]

Duplicate post

[TomatoTomahto]

I handle the finances, and the employer has bungled some things in the past so I have to stay on top of them. Also, since they buy our shares when the market is UP, we are paying more for the shares. Who would like to do that?

Boglemama, I guess it depends on your relationship with the employer; I handle our finances also, but at most I might tell my wife what to ask HR about, but I'm not sure what their reaction would be if I contacted them directly.

To the other point, you initially indicated that the employer was quick when the market was down but slow when it was up The first responder and I took it as the opposite of what you say now. It is probably a councidence. In any case, while it might be a pain, I don't think it's actionable. My wife's employer takes a month to convert her Euro-denominated deferred comp to dollars into her bank -- a royal PITA, but that's the way it is.

[Epsilon Delta]

The law specifically says the standard is as soon as possible and that the 15th is not a safe harbor.

[Juniormint]

I feel for you. It's the same way with my employer. I get paid on the last day of the month, payroll usually doesn't cut the check until about two days after payroll, then accounts payable has to process it which is another day, then it gets mailed and I have to wait till Vanguard processes it. My investments don't hit my account until a week to two weeks until after I get paid. In my case, because I understand the entire process, I know it's not my employers fault because they try to be as timely as possible. If however, my employer were to cut a check on the 14th day of the month, I would be angry even though they legally have till the 15th.

[Boglemama]

As of 3/18/13, still no deposit. We called Fidelity and they say that no deposit has been made this month. Where is a few thousand of our money? My husband emailed payroll and benefits to ask. This is way over the limit.

[Alskar]

From your considerate and thoughtful tone, you must be a therapist.

Our contributions go in quickly when the market is low, and are delayed when the market us up. I have no idea why. It's just always been like that. It's frustrating for an employer to have thousands of your money in limbo for weeks.

I saw this very same pattern at one of my former jobs. Irked me to death. I'm what I call "detail oriented", but some of my friends call me anal. Call it what you like, but I found it unacceptable. Talking to HR didn't help. Talking to the account executive at the Third Party Administer (TPA) didn't help. So I did what any "detail oriented" engineer would do...I kept a spreadsheet. I signed up for Morningstar. Everyday I entered the closing value for the Wilshire 5000 index. I used this as a reference for "the market". I also entered the pay dates, and the day of the contribution.

With this data, I correlated the time between the pay date and the contribution date with the market. I found a less than 10% chance that the delays in contribution when the market was rising was due to pure random variation. Curiously, when "the market" (as measured by the Wilshire 5000) was dropping the 401(k) contribution would get into my account in two days. When it was rising it could take a couple of weeks.

I showed the the Gucci-wearing, BMW-driving, Marin County-living, oily-haired slickster at the TPA my data. He assured me in patronizing tones that there was nothing illicit going on. I asked him if an audit by the EBSA would confirm that. He assured me that it would. I was fully prepared to request that audit, but suddenly and magically the variance went to zero. Three business days after a pay date, the money showed up in my account just like clockwork. My graph of variance went completely flat and stayed that way for the entire rest of my tenure at that corrupt corporation. I'm sure that it was completely coincidental and this had nothing to do with my thinly veiled threat to get the EBSA involved.

Based on my personal biases, I have no doubt your husband's employer is playing the same game, but don't take my word for it. Have a look at #3 here: http://www.dol.gov/ebsa/Publications/10warningsigns.html. It is a tough situation. Turning your employer into the EBSA isn't probably going to win your husband any friends. Perhaps a chat with the TPA?

[Alskar]

But, stop a minute and think: Why on earth would the company care what the markets are doing? What advantage would it be for them?

They get the interest on the "float". Interest rates might not be that high, but they're not zero. Depending on the size of the company a few days of interest can be compelling. Some company's consider this good business practice, like delaying accounts payable.

If the company is struggling financially, delaying 401(k) payments can mean the difference between making payroll and not. I've been at enough startups to know the warning signs. If the 401(k) contributions start taking long and longer, the place is about to go under.

[Boglemama]

Alaskar-Your posts were very eye opening! It's great that you called your company on their "problem". Our deposit was made as of 3/18/13, breaking the law by being 3 days later than the outermost limits of when they were supposed to deposit our contribution. I have noticed the contributions getting later and later, but it's never gone over the limit like this. I presume that they are taking advantage of the interest float that you mentioned as their income has been cut in recent years.

I spoke with my husband and while we will keep record of this recent late payment, we don't intend to do anything. We had informed payroll and they are aware of us knowing of the late payment. Even though it would be wrong for the whistle blower to face repercussions, I'd hate for that to happen to my husband. He really likes his job and coworkers. It's just frustrating.

[TomatoTomahto]

But, stop a minute and think: Why on earth would the company care what the markets are doing? What advantage would it be for them?

They get the interest on the "float". Interest rates might not be that high, but they're not zero. Depending on the size of the company a few days of interest can be compelling. Some company's consider this good business practice, like delaying accounts payable.

If the company is struggling financially, delaying 401(k) payments can mean the difference between making payroll and not. I've been at enough startups to know the warning signs. If the 401(k) contributions start taking long and longer, the place is about to go under.

And the reason that the company doesn't need the float in falling markets to make payroll but does during rising markets is ____________.

[tibbitts]

The OP should provide context. Is the employer struggling? Layoffs, furloughs and pay cuts? If not, many of the comments don't apply. It would be kind of silly for the employer to think about float now, and not when short rates were 6%, so that seems an unlikely explanation. Playing the markets with the money seems even more unlikely for any substantial-sized business.

My recent 403b contributions (from payroll, no match), with the pay period at month-end, were deposited 3/12, 2/15, 1/7, 12/10, 11/9, and 10/9. It's not a huge concern to me, relative to all the other issues in life.

Paul

[kitteh]

As of 3/18/13, still no deposit. We called Fidelity and they say that no deposit has been made this month. Where is a few thousand of our money? My husband emailed payroll and benefits to ask. This is way over the limit.

Like a previous poster, I am wondering if the employer is starting to flounder.

[Alskar]

And the reason that the company doesn't need the float in falling markets to make payroll but does during rising markets is ____________.

Because they're investing "the float" in something that is liquid but tracks the market and pocketing a few days worth of gains. How do you explain it?

[Epsilon Delta]

And the reason that the company doesn't need the float in falling markets to make payroll but does during rising markets is ____________.

It could possibly be the custodian: Buy the stock when the deposit become irrevocable, if it goes up credit it to the account at the later date and price and keep the difference, if it goes down credit it at the original date and price. Heads I win, tails I break even. How many months of data do you have? Just how strong is the pattern?

[Geoff]

I'm not trying to justify the employer here, only to provide some additional information. When I searched for the topic the outer limit guideline for employers was described as 15 business days, not calendar days.

[TomatoTomahto]

And the reason that the company doesn't need the float in falling markets to make payroll but does during rising markets is ____________.

Because they're investing "the float" in something that is liquid but tracks the market and pocketing a few days worth of gains. How do you explain it?

How do I explain it? Bingo, I can't. Because if I could explain it, I would be saying that the company could correctly predict the movement of the market, which as a BH I of course don't believe. And even if I believed it, I think the company would be in a different business (why make widgets (or whatever they do) if you can predict the market?).

The human inclination to find patterns in random events is proven, whereas the human ability to predict the markets is disproven.

It doesn't matter how liquid the market is, unless you think they have a way of backdating trades, which would be illegal and also fail the "if they could do this, why don't they get into this business" test.

[sscritic]

I'm not trying to justify the employer here, only to provide some additional information. When I searched for the topic the outer limit guideline for employers was described as 15 business days, not calendar days.

Of the next month.

in no event later than the 15th business day of the month following the month in which the employer withheld the contributions from the employee’s paycheck.

This however can still get the company in trouble during a DOL audit. This is the "in no event" outer limit, but is not a safe harbor.

[Alskar]

The human inclination to find patterns in random events is proven, whereas the human ability to predict the markets is disproven.

It doesn't matter how liquid the market is, unless you think they have a way of backdating trades, which would be illegal and also fail the "if they could do this, why don't they get into this business" test.

Anything answer I give to that question would be speculation. I'm an engineer not a financial expert so I don't know what know the precise mechanism the TPA and/or my former employer were using to take advantage of the float. All I need to know is that the objective, observed data could not easily be explained by luck.

Note that Harry Markopolos didn't know the precise means Bernie Madoff was using to cheat his investors, but he did know that the results Madoff reported were not possible. Similarly, it was extremely unlikely that the variation in contribution timing could be explained by random variation.

I feel that is telling that after my inquiry (or threat) the variance in 401(k) contribution timing went to zero. That is, my 401(k) contribution were credited into my account three business days after every pay date with no variation for the remainder of the time I was with the company.

[livesoft]

Here's a story from last week about a CEO allegedly getting beaten up because of some possible problems with 401(k) deposits:
http://www.yourhoustonnews.com/clevelan ... 9e387.html

On March 1, hospital employees threatened lawsuits and walkouts when their paychecks were held up for several hours due to what Fulner described as an accounting issue. Hospital employees also were upset because they say deductions were made from their paychecks that were not being applied appropriately to loan payments, child support and 401Ks. The 401K payments were eventually made.