Hey Nole how did this pan out with your employer?
I just got this email from my 401(k) provider, don't know if you need any more info but:
Attention Plan Sponsors & Advisors:
In light of recent discussions by the Department of Labor regarding their intent to begin strictly enforcing deposit requirements for qualified plans, we wanted to take an additional opportunity to notify you of the contribution deposit requirements to remain in compliance and avoid monetary penalties. Below is an excerpt from the IRS website regarding contributions to be made to the trust by the employer/sponsor of qualified plans:
?Contributions made to the trust. The employer makes contributions to the trust for the amounts of the elective deferrals made by the plan participants. The Department of Labor requires that the contributions must be made on the earliest date that the employer is able to segregate the amounts from the employer?s general assets but no later than the 15th day of the month following the month in which the participant would have received the amount in cash if not for the deferral election. This can usually be done on the date that the employer pays payroll taxes. Keep in mind that the rule regarding the 15th day of the following month does not provide a safe harbor for depositing deferrals. Rather, it sets the maximum deadline. If the employer does not make the deposits timely, the failure constitutes a prohibited transaction. Prohibited transactions are subject to a 15% excise tax, payable with the filing of Form 5330, Return of Excise Taxes Related to Employee Benefit Plans. More information on Prohibited Transactions can be found in Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans).
Contributions made by the employer to match part or all of the participant?s elective deferrals may be made at the time the elective deferrals are contributed or later, but in no event later than the due date of the employer?s federal income tax return, including extensions. Contributions made by the employer that are not tied to elective deferral amounts must also be made no later than the due date of the employer?s federal income tax return, including extensions.?
As well, we have included some FAQ?s below regarding late deposits as a reference for you:
? Q: When are deposits of employee deferrals and loan payments considered late?
A: The Department of Labor has issued regulations that govern the time frame for depositing employee deferrals and loan payments to employee benefit plans. Unfortunately, these regulations do not state a hard and fast rule for every employer but rather give several examples that the Employer must review to determine the appropriate deposit deadline for that company. These regulations can be accessed at:
http://www.dol.gov/dol/allcfr/ebsa/Title_29/Part_2510/29CFR2510.3-102.htm
Amounts that either you, or your independent auditor, have determined to have been deposited late must be reported on the Form 5500 Schedule I or H.
? Q: Do we have to fund the lost earnings to participants when we deposit their employee deferrals and loan payments late?
A: The DOL regulations require that you make the participants? accounts whole by depositing an additional amount representing the lost earnings opportunity. This can be calculated using several methods but the DOL has simplified this to some extent by offering an earnings calculator. However, once the lost earnings per payroll are calculated using the DOL calculator, the earnings must be allocated to the participants? accounts in proportion to their share of the amount deposited late for each specific payroll period.
? Q: Do we need to file a Form 5330 with the IRS?
A: The IRS requires that you file a Form 5330 to report the corrective action regarding these late deposits and to indicate the excise tax you owe to the IRS. Alternatively, you can submit your corrections for DOL review under the Voluntary Fiduciary Compliance Program. If the DOL approves the proposed corrective action, the IRS will waive the Form 5330 filing and the associated excise tax. If you are interested in submitting proposed corrections to the DOL through their Voluntary Fiduciary Compliance Program, please contact us for an individualized quote.
