Why would my company delay 401k contributions by 3 days?

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Topic Author
steve_LNU
Posts: 13
Joined: Tue Dec 17, 2019 8:10 pm

Why would my company delay 401k contributions by 3 days?

Post by steve_LNU »

I started working for a large company in November, with a 401k and an employer match of 4%. We got paid Friday, 3/20, and typically 401K contributions would go into Fidelity on the following Monday. Contributions did not go into our Fidelity accounts until last night (3/26), after a "peak" of this little run we've had (and now the market is down 4% today).

I know in the long run this won't matter investment wise, but I'm really wondering about your thoughts as to why this occurred? Could it be cash flow issues with the company as to why the contributions were delayed 3 days?

Thank you.
lakpr
Posts: 6056
Joined: Fri Mar 18, 2011 9:59 am

Re: Why would my company delay 401k contributions by 3 days?

Post by lakpr »

http://www.401khelpcenter.com/401k_educ ... ngday.html
Payday

The first step is for your employer's payroll department to withhold your contribution from your paycheck. This amount plus any employer matching contribution has to be verified by your payroll office - not just for you, but for every employee who contributes to the plan! This can take a while, especially if your payroll department is small and/or your company is big.
The DOL has made another change for retirement plans with fewer than 100 participants. In such plans, contributions must now be deposited with the 401k no later than the seventh business day following the day on which such amount was deducted from the employee's paycheck.
It's entirely conceivable that, due to the COVID-19 related restrictions, your employer hasn't been able to deposit your contributions until last night. These are extra-ordinary times ...
HomeStretch
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Joined: Thu Dec 27, 2018 3:06 pm

Re: Why would my company delay 401k contributions by 3 days?

Post by HomeStretch »

My guess is your HR and finance groups are extra busy and perhaps adjusting to working remotely and coordinating remote approvals for wires transfer, etc.

Three days after payroll is timely. I wouldn’t be concerned just due to this. A mega Corp is going to prioritize employee-related payments over vendor payments if there is a cash flow issue.
jello_nailer
Posts: 263
Joined: Sun Apr 07, 2019 10:20 pm

Re: Why would my company delay 401k contributions by 3 days?

Post by jello_nailer »

6 days is lightning fast compared to what we get at MegaCorp, I'm lucky to get it before the next bi-monthly payroll deposit. At times I have had 2 payroll withholdings backed up waiting to be deposited in Vanguard.
Total B.S. The IRS rules are "Loose" on this. Irritating. :annoyed
sailaway
Posts: 2223
Joined: Fri May 12, 2017 1:11 pm

Re: Why would my company delay 401k contributions by 3 days?

Post by sailaway »

It could have been your company, the payroll company or the servicing company, or all three experiencing delays due to the disruption in normal life, someone trying to figure out how to work from home with kids running around, etc.
Spirit Rider
Posts: 13481
Joined: Fri Mar 02, 2007 2:39 pm

Re: Why would my company delay 401k contributions by 3 days?

Post by Spirit Rider »

jello_nailer wrote: Fri Mar 27, 2020 10:54 am 6 days is lightning fast compared to what we get at MegaCorp, I'm lucky to get it before the next bi-monthly payroll deposit. At times I have had 2 payroll withholdings backed up waiting to be deposited in Vanguard.
Total B.S. The IRS rules are "Loose" on this. Irritating. :annoyed
The IRS may be relatively loose on this, but the DOL's regulations most certainly are not. Under DOL/EBSA regulations, an employer must deposit employee deferrals on the earliest date that they can be reasonably segregated from the employer's general assets. While there is a 7 business day safe-harbor for employers with < 100 employees, the DOL expects employers with > 100 employees to make timely deposits in < one week.

The OP's scenario would be acceptable even if not in the middle of a crisis. I think it is extremely unlikely the DOL would respond to a complaint about your standard scenario during this crisis. However, when we return to some sense of normalcy, an anonymous complaint to the DOL might be in order.
bovineplane
Posts: 141
Joined: Wed Jul 26, 2017 5:24 am

Re: Why would my company delay 401k contributions by 3 days?

Post by bovineplane »

Always thought mine was delayed. check on Friday, 401k deposit Monday close of business. Every week like clockwork. Guess I am lucky.

Course over time, as long as the deposits are regular it should make no difference.
Spirit Rider
Posts: 13481
Joined: Fri Mar 02, 2007 2:39 pm

Re: Why would my company delay 401k contributions by 3 days?

Post by Spirit Rider »

The employee deferrals have to be segregated from the employer's general assets, sent to the plan administrator/custodian who then deposits the amount into their separately accounted for location. Keep in mind any delay may not be entirely due to the employer.
Topic Author
steve_LNU
Posts: 13
Joined: Tue Dec 17, 2019 8:10 pm

Re: Why would my company delay 401k contributions by 3 days?

Post by steve_LNU »

Thank you very much, everyone. Please stay healthy. :happy
jello_nailer
Posts: 263
Joined: Sun Apr 07, 2019 10:20 pm

Re: Why would my company delay 401k contributions by 3 days?

Post by jello_nailer »

Spirit Rider wrote: Fri Mar 27, 2020 11:40 am
jello_nailer wrote: Fri Mar 27, 2020 10:54 am 6 days is lightning fast compared to what we get at MegaCorp, I'm lucky to get it before the next bi-monthly payroll deposit. At times I have had 2 payroll withholdings backed up waiting to be deposited in Vanguard.
Total B.S. The IRS rules are "Loose" on this. Irritating. :annoyed
The IRS may be relatively loose on this, but the DOL's regulations most certainly are not. Under DOL/EBSA regulations, an employer must deposit employee deferrals on the earliest date that they can be reasonably segregated from the employer's general assets. While there is a 7 business day safe-harbor for employers with < 100 employees, the DOL expects employers with > 100 employees to make timely deposits in < one week.

The OP's scenario would be acceptable even if not in the middle of a crisis. I think it is extremely unlikely the DOL would respond to a complaint about your standard scenario during this crisis. However, when we return to some sense of normalcy, an anonymous complaint to the DOL might be in order.
That right, it was EBSA regulation now that I think about it. Thanks.
I also thought there was a maximum hard deadline of the 15th of the following month. If the geniuses in payroll can do payroll and hundreds or thousands of transactions at the speed of light, there is no excuse. If your paycheck is EFT to your bank - your 401K should be at Vanguard also.
stoptothink
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Joined: Fri Dec 31, 2010 9:53 am

Re: Why would my company delay 401k contributions by 3 days?

Post by stoptothink »

jello_nailer wrote: Fri Mar 27, 2020 10:54 am 6 days is lightning fast compared to what we get at MegaCorp, I'm lucky to get it before the next bi-monthly payroll deposit. At times I have had 2 payroll withholdings backed up waiting to be deposited in Vanguard.
Total B.S. The IRS rules are "Loose" on this. Irritating. :annoyed
My previous employer was regularly 4 paychecks behind on 401k contributions, and they once totally missed a contribution that ultimately took 7 months. Of course, at the time, I didn't know that I had any recourse (an organization to report them to).

I would suspect (based on my experience) that a delay of 3 days is quite normal, maybe even faster than normal. I've noticed that mine is anywhere from 1-6 days now (mid-sized company, ~4500 employee).
Aku09
Posts: 64
Joined: Wed Jan 09, 2019 11:29 am

Re: Why would my company delay 401k contributions by 3 days?

Post by Aku09 »

I get paid once a month on the last business day of the month. My contributions don’t hit until around the 10th and sometimes a couple days after that.
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