Delay in 401k Contribution Posting, cause for concern?

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fantasytensai
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Delay in 401k Contribution Posting, cause for concern?

Post by fantasytensai » Wed Sep 05, 2018 3:13 pm

My employer (small-med company, 50-100 employees) has always been lax in posting 401k contributions. But lately it has gotten worse and worse. It used to be that there would be about a 5 day delay in posting (i.e. 1/1-1/15 contribution would post around 1/20). Then it became 10 days. Now, it has gotten long enough to cause me concern of potentially running afoul of the DoL regulations. My contribution from 8/1 to 8/15 still has not posted, and under DoL regulations if it is not posted by the 15th business day of September (9/20), there would be a messy situation. I know it's only 9/5, but I have close to zero confidence that my employer would post both the 8/1 to 8/15 and the 8/15 to 8/31 contribution before 9/20 (when both are due).

To make matters worse, the 401k administrator (Empower Retirement) is very incompetent. Our contact person at the administrator doesn't know the difference between 401k and IRA (it is actually this bad). So asking him is out of the question. What would you do in this situation?

soccerrules
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Re: Delay in 401k Contribution Posting, cause for concern?

Post by soccerrules » Wed Sep 05, 2018 3:42 pm

I would speak to
1) HR lead
2) Benefits coordinator
3) Payroll Lead

Whomever you think has the most knowledge of these situations within your company.

You might be surprised that "they" are unaware that the issue exists.
Don't let your outflow exceed your income or your upkeep will be your downfall.

MichCPA
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Re: Delay in 401k Contribution Posting, cause for concern?

Post by MichCPA » Wed Sep 05, 2018 3:44 pm

https://www.askebsa.dol.gov/WebIntake/Home.aspx

When they are late, you can go here and complain to the DoL. You can request that they not contact your employer without speaking to you first. They say they will contact you in a couple of days. Bring it up casually to HR and if it isn't fixed by 9/20 report it.

fantasytensai
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Re: Delay in 401k Contribution Posting, cause for concern?

Post by fantasytensai » Wed Sep 05, 2018 3:57 pm

Is there a way to deal with this situation without being the squeaky wheel? My general life strategy is to lie low and not attract attention. I may contact DoL but withhold my own personal information. If my employer is late in contribution, is the mess on their hands or mine? I don't really mind missing out on a couple of months worth of market gains, just want to make sure everything is there eventually.

Appreciate the help guys!

MichCPA
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Re: Delay in 401k Contribution Posting, cause for concern?

Post by MichCPA » Wed Sep 05, 2018 4:06 pm

It's definitely not your issue. If your employer doesn't put the money in eventually, they have stolen it. It's your money withheld from your paycheck. If you don't want your employer to know, just note in the submission box that you don't want DoL to contact them like it says in the instructions right below the box. Once you have talked to the DoL rep, you could probably withdrawal the complaint or ask to be anonymous. No way this would be the only time DoL had that request.

Spirit Rider
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Re: Delay in 401k Contribution Posting, cause for concern?

Post by Spirit Rider » Wed Sep 05, 2018 6:02 pm

The 15th business day of September 2018 is the 24th. That is the maximum that a large employer can take even with sufficient justification. The actual rule is, that the employer must transmit the contribution as soon as it can reasonably segregate the contributions from the businesses other funds.

There is a special small employer (< 100 employees) 7 business day safe harbor rule. A small employer must report on Form 5500 Schdule I each and every occurrence where they missed this deadline.

Your 8/1 -8/15 contributions should have been transmitted to Empower no later than 7 business days after the pay date of the 8/1 - 8/15 pay period. Depending on whether they pay Empower by check or ACH, this could easily take 2- 5 business days.

When was your actual pay date for 8/1 - 8/15. If they pay a week in arrears (8/22), 7 business days would be 8/31 that they would be required to transmit to Empower. Add in the holiday weekend, it would not even likely be late if it didn't show up until 9/10.

fantasytensai
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Re: Delay in 401k Contribution Posting, cause for concern?

Post by fantasytensai » Wed Sep 05, 2018 9:18 pm

Spirit Rider wrote:
Wed Sep 05, 2018 6:02 pm
The 15th business day of September 2018 is the 24th. That is the maximum that a large employer can take even with sufficient justification. The actual rule is, that the employer must transmit the contribution as soon as it can reasonably segregate the contributions from the businesses other funds.

There is a special small employer (< 100 employees) 7 business day safe harbor rule. A small employer must report on Form 5500 Schdule I each and every occurrence where they missed this deadline.

Your 8/1 -8/15 contributions should have been transmitted to Empower no later than 7 business days after the pay date of the 8/1 - 8/15 pay period. Depending on whether they pay Empower by check or ACH, this could easily take 2- 5 business days.

When was your actual pay date for 8/1 - 8/15. If they pay a week in arrears (8/22), 7 business days would be 8/31 that they would be required to transmit to Empower. Add in the holiday weekend, it would not even likely be late if it didn't show up until 9/10.
Thanks for the information. The actual pay date is 8/15. So they are already late. I think I can go to DoL now then.

Why do they give more time for big companies to comply? Shouldn't it be the other way around?

Spirit Rider
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Re: Delay in 401k Contribution Posting, cause for concern?

Post by Spirit Rider » Wed Sep 05, 2018 9:40 pm

fantasytensai wrote:
Wed Sep 05, 2018 9:18 pm
Thanks for the information. The actual pay date is 8/15. So they are already late. I think I can go to DoL now then.
Then 8/24 was their required transmittal date to Empower. Giving transmittal times to Empower and deposit times. They are no more than a couple days late at this time. I don't know if I would go to DOL over a few days. You do not even know at this point if Empower might be the problem. I would contact HR before I would go nuclear (DOL) on them.
Why do they give more time for big companies to comply? Shouldn't it be the other way around?
They don't necessarily give more time to large employers. The 7 business days for small business is a safe harbor. A larger company has no safe harbor, they can actually be expected to take less time.

fantasytensai
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Re: Delay in 401k Contribution Posting, cause for concern?

Post by fantasytensai » Wed Sep 05, 2018 9:45 pm

Spirit Rider wrote:
Wed Sep 05, 2018 9:40 pm
fantasytensai wrote:
Wed Sep 05, 2018 9:18 pm
Thanks for the information. The actual pay date is 8/15. So they are already late. I think I can go to DoL now then.
Then 8/24 was their required transmittal date to Empower. Giving transmittal times to Empower and deposit times. They are no more than a couple days late at this time. I don't know if I would go to DOL over a few days. You do not even know at this point if Empower might be the problem. I would contact HR before I would go nuclear (DOL) on them.
Why do they give more time for big companies to comply? Shouldn't it be the other way around?
They don't necessarily give more time to large employers. The 7 business days for small business is a safe harbor. A larger company has no safe harbor, they can actually be expected to take less time.
Interesting, it's already been 7 business days, 12 regular days since 8/24. I don't think it takes Empower that long to process the deposit...this is definitely on the employer (perhaps a sign of financial distress? topic for another day)

What I mean about the safe harbor is, there is a safe harbor for small businesses that they will be safe if they deposit within 7 business days. BUT, businesses won't actually be in trouble unless the deposit falls outside the 15th business day of next month deadline. Therefore, the 7 business day "safe harbor" actually feel like a limitation, since the "as soon as reasonable" language is so vague that it might as well be gibberish nonsense.

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JamesSFO
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Re: Delay in 401k Contribution Posting, cause for concern?

Post by JamesSFO » Wed Sep 05, 2018 10:02 pm

Just as a thought how about asking someone in payroll gently if they know what's up? Separate ~5 days (not all that atypical) from what sounds like ~20 days for the 8/15 paystub and just ask what is going on with the 401K contribution(s). You might get a reasonable answer, e.g. wire transfer messed up, Empower didn't pull correctly, or Empower pulled but Empower hasn't yet allocated to accounts, etc.

Spirit Rider
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Re: Delay in 401k Contribution Posting, cause for concern?

Post by Spirit Rider » Wed Sep 05, 2018 11:14 pm

fantasytensai wrote:
Wed Sep 05, 2018 9:45 pm
What I mean about the safe harbor is, there is a safe harbor for small businesses that they will be safe if they deposit within 7 business days. BUT, businesses won't actually be in trouble unless the deposit falls outside the 15th business day of next month deadline. Therefore, the 7 business day "safe harbor" actually feel like a limitation, since the "as soon as reasonable" language is so vague that it might as well be gibberish nonsense.
You misunderstand.

A small business will most definitely will be in trouble if they miss the 7 business day safe harbor. They must report each and every occurrence on their Form 5500 Schedule I. They will be subject to penalties for repeatedly missing the safe harbor.

The DOL is very aggressive with larger companies. They have and will assess penalties for repeated occurrences well before the 15th of the next month. In fact the guidance indicates that large employers should be faster than small employers.

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Watty
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Re: Delay in 401k Contribution Posting, cause for concern?

Post by Watty » Wed Sep 05, 2018 11:23 pm

Once thing to watch out for is that if you go to the DOL and the employer gets into trouble then they may decide that having a 401k is more trouble than it is worth and they could discontinue the 401k.

I would not like the situation but I would work with HR as much as possible to get this fixed and the money is not delayed too long.

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JamesSFO
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Re: Delay in 401k Contribution Posting, cause for concern?

Post by JamesSFO » Wed Sep 12, 2018 1:08 am

fantasytensai wrote:
Wed Sep 05, 2018 3:13 pm
My employer .... What would you do in this situation?
Just wondering (a) what you decided to do and (b) what was the outcome?

mariezzz
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Re: Delay in 401k Contribution Posting, cause for concern?

Post by mariezzz » Wed Sep 12, 2018 10:14 am

The employer should be grateful to you for raising the issue. If the delay isn't an error, then there are serious problems at that employer and you should start looking for a new job immediately.

Squeaky wheels are often the only way positive change is made. I got an employer to add Vanguard options to a 401k simply by putting a well-reasoned argument in writing. It greatly reduced expense ratios (by around .45%), so I've made everyone at that employer potentially richer by being the squeaky wheel and getting lower fee options implements (including the people who won't speak up but should).

fantasytensai
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Re: Delay in 401k Contribution Posting, cause for concern?

Post by fantasytensai » Fri Sep 14, 2018 1:52 pm

Update: I did nothing since both contributions posted on the same date. Weird. Hopefully just a one time thing.

Dottie57
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Re: Delay in 401k Contribution Posting, cause for concern?

Post by Dottie57 » Fri Sep 14, 2018 2:14 pm

fantasytensai wrote:
Fri Sep 14, 2018 1:52 pm
Update: I did nothing since both contributions posted on the same date. Weird. Hopefully just a one time thing.
Keep watching for a year.

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