Pete and Team,
While reviewing my 401(k) transaction history, I noticed irregular time gaps between deposits. I also noticed deposits in multiples of my weekly withheld amount. It looks to me like the company (currently in bankruptcy proceedings) was deciding whether or not to deposit my withheld 401k contributions based on cash flow that payroll week.
Maybe this is a sanctioned business practice, maybe it’s not. If it is appropriate behavior, what are the parameters placed on those kinds of judgement calls? What are the time limits on deposits made? If it is not permitted, who do I inform? If illegal or inappropriate, do I have any recourse? Can I recoup losses arising from the irregular timing of the deposits? On a related note… what tool would you use to contrast the gains or losses over time against the reality of my account. In other words, is there a calculator simple enough for an amateur to use that will show the difference in account value based on when deposits should’ve been made versus what actually occurred?
I should have checked this sooner, but I trusted the people responsible. I volunteered probably ten or more times to take a delayed paycheck and encouraged others to do the same as a result of that trust. If the company’s behavior was appropriate, then I guess my takeaway is “trust the dealer but cut the deck”. If the behavior was inappropriate, my hope is to make sure it brought to light to make sure the employees are not harmed further and are informed of remedies available to them.
Thanks for your time and attention.
Frustrated in Fishers
Employers do get some leeway in the timing of employee contribution deposits to their 401(k) plan. However, the letter of the law is sometimes taken advantage of.
Large employers (over 100 employees) are supposed to send in their employee contributions as soon as reasonably possible once the money is separated from the general assets of the business. It’s reasonable to think this should take a few days, tops, right? Frustratingly, there isn’t a very specific number of days provided for us. However, the law states that employers must not send in the contributions any later than the 15th day of the month following when the contributions were originally made. In other words, if you make a contribution in March, the employer has until April 15 to send it in.
I want to be clear that depositing the money on the 15th day of the following month is on the far end of what is permitted. Small businesses (less than 100 employees), for example, with less robust resources than a large company, are given a “safe-harbor” timeframe of 7 days to send in the contributions after they are made. If a theoretically less capable small business is expected to have their employee contributions sent in within 7 days, it’s entirely reasonable to think a large employer can do it to. Well, at least one not in the middle of bankruptcy as that could be presenting a number of internal issues.
One thing of note to point out is that your plan document will lay out how long the employer has to make the matching contributions (if any). Double check to make sure the irregular deposits you’re seeing aren’t the employer match.
If you’re still concerned about the timing of your deposits, ask HR to explain what’s going on. You may or may not be satisfied with the response. If all deposits have been made within the rules laid out, there won’t be much you can do about. If deposits fall outside the windows given, there is a process for the employer to self-correct the problem with the Department of Labor. The IRS offers employers guidelines for employers to correct the situation, as well. Your employer most likely knows about these already. Additionally, the Department of Labor provides this handy fact sheet with additional information and a phone number for employees who suspect there may be an issue.
Regarding calculators that would help you determine if you (and your coworkers) have missed out on gains due to irregular timing of contributions, I don’t know of any. I suspect it would take a not insignificant amount of legwork to make a determination. If you choose to start comparing prices of your holdings on the day you actually bought the investments in your account with when you feel you should have bought them, make sure you’re consistently using the same number of days after payday for deposit. At that point, it will entail looking for historical prices and comparing them to what your cost was.
Finally, regardless of how this situation continues to unfold, it’s not likely to be resolved quickly. Between an already strained employer and/or the possibility of a government agency intervention, neither of those options seems likely to fix the issue in a timely manner. I hope everything is above board with your contributions. But, if not, best of luck to you and your co-workers.
Damian is the lead Financial Concierge on Your Money Line, the financial help line serving all Pete the Planner® Financial Wellness clients. Damian is a CERTIFIED FINANCIAL PLANNER™ professional and loves answering your money questions. Despite sharing a last name and sense of humor, Damian and Pete are not related.