How long does my employer have between taking a 401K deduction from paycheck and depositing it into my 401K?

Question

It's the end of the year, and I've noticed that I've had more deducted from my check for 401K contributions than have been deposited into my 401K account. This may not be a problem (yet), but I would imagine the IRS allows only a certain amount of time for employers and/or plan administrators to make these deposits. I've already raised the question with the employer (so they can look into it and fix the problem), but I'd like to know how long I should normally wait before raising this concern with them again in the future. How long does my employer have between taking a 401K deduction from paycheck and depositing it into my 401K?

Answer 1

The limits are actually set by the department of labor as follows:

When must employers deposit withheld employee contributions into a 401(k) plan or other pension plan?

Employers must transmit employee contributions to pension plans as soon as they can reasonably be segregated from the employer’s general assets, but not later than the 15th business day of the month immediately after the month in which the contributions either were withheld or received by the employer.

Jim Kirby, CPA/PFS, CFP, CFS

Answer 2

That depends upon the plan. My previous employer made the deposits quarterly, a few days after then end of the fiscal quarter. The funds sat in an interest bearing account (at 8%) until the deposits (including the interest and employer match) were made. My current employer makes the deposits at the end of the month so it usually shows up in the account the day after the end-of-month payday.

Answer 3

There's no fixed time. There will always be a delay, even a month. If your company uses an outside firm to handle the 401K, you should be fine.

(The IRS cares about payroll taxes. These aren't payroll taxes.)