Let’s suppose a company is floating the employee’s 401k contribution beyond the “acceptable” time period. In other words, funds are withheld from paycheck but then not deposited into 401k until much later, so the employee is losing out on the interest they could be earning.
What would the employee be entitled to via a whistleblower action through the Depart of Labor?
How much later? I think I don’t see mine in my funds for several days…always makes me wonder, but I never knew whether it’s the fault of the company or the investment firm.
Exactly.
I believe federal law allows up to 15 days to deposit the withheld funds into the 401k.
There is a small business safe harbor that applies to businesses with fewer than 100 participants. The safe harbor says a small business’s 401(k) deposits are timely if they are made within seven business days from the date the contributions were withheld from employee wages.
For arguments sake, let’s say the float averages ~25-30 days, but has been as long as 125.
Forget the ‘for arguments sake’, if it’s actually that timeframe, that sounds seriously unethical. Have any questions been asked and answered about this? How could a company get away with this already, without the employees going ballistic?
Can you request that your deposits be made in a more timely fashion?
Not sure what the “whistleblower” reference is to.
I was in a situation once where I noticed that my 403b contributions were not being recorded…turned out, the payroll person just wasn’t doing their job properly. I wrote a very polite letter to my boss saying that the money was withheld from my check but wasn’t appearing in my account for months. Very immediately, the boss came to speak to me.
I politely said…”I don’t expect folks to screw around with me about my kids…or my money”.
ETA…deposits were immediately made…and never were held up again.
This was in the day when there were not electronic transfers. Now…all of this should be electronic transfers, right? And they can happen immediately.
Deposits must be “timely” but they haven’t defined timely. Generally, 7 days is a safe harbor period for small plans.
Deposits used to be an issue when things where done by hand and excel spreadsheets. Today, it’s much simpler and done online. Now, what your investment provider does with it to hit your specific account may take some time to show up.
So back to the OP. How long? And more importantly, why? A sure sign of employer financial difficulty is slow deposit of employee contributions, and thus the rule for timely depositing.
The DOL requires that the employer deposit deferrals as soon as they can be segregated , however it cannot be later than the 15th business day of the following month, which is not to be relied upon as a matter of being normal.
If your plan has specific timing in the plan’s doc then that should be followed. If none of the above is followed it’s a huge issue and the plan could be subject to disqualification in extreme circumstances. There are correction programs available with hefty fines.
I don’t know whether there’s any “whistleblower” reward, which is what the OP is asking about. Regardless, I strongly recommend that he speak with his Benefits and/or Payroll Departments about this. Then, if he doesn’t get satisfaction, he should report this to the Department of Labor. Use this link:
About 10 years ago, my small business employer set up a new IRA plan, but took several months to do so. During those three or four months, my contribution was being deducted from my paycheck but not deposited. I had no idea where to turn for help since the company had just 14 full-time employees. All worked out in the end, but I probably missed out on some growth of my contributions.
@partyof5 is correct.
Failure to timely submit employee contributions is a fiduciary violation and one of the few things that will trigger criminal charges by the Department of Labor. (I’m a former 401k plan administrator at a third-party admin firm, specializing in small/mid-size plans). There is a question on the Form 5500 that the plan administrator/fiduciary has to sign off each year verifying that contributions were made on a timely basis. That red flag can trigger IRS investigations/penalties, too.
Don’t know that there is a whistleblower “incentive.”
That said, an employer has until the corporate return is filed (with extensions) to make employer contributions (match, profit sharing, stock). That can run as long as ten months of the year after the plan year (i.e., 2018 PS contrib can be made by October 30, 2019, in a plan that runs on a calendar year, with extensions).
Employee contributions have the very short window for deposit.
Yes @CountingDown I’m aware of the employer contribution timelines which are quite liberal. I’m more interested in seeing thoughts on the employer not making the employees contribution in a “timely” manner (i.e. 7 days). I’ve heard stories about people bringing these issues to the HR/Payroll dept only to find themselves unemployed shortly thereafter (wrongful termination discussion would be another thread).
So the question becomes, allow the float or report it to the DOL - assuming there’s an incentive to do so as future employment might be compromised.
Can’t the person report it anonymously? It sounds as if you are hoping for some kind of reward because you might get wrongfully terminated. I don’t know that there is (or should) be a reward for reporting wrongdoing, but certainly there is shelter from it. I would keep a paper trail.
How big is the employer that you work for? How frequently is the plan being valued? How many investment options - if any - are available for employee directed accounts?
If future employment might be compromised, that would suggest to me that this is not a company that is run ethically, so there already may exist a significant risk that the company may end up getting sued and close the doors without much notice.
I would err on the side of sending a letter of inquiry to the Plan Administrator requesting clarification on the normal deposit process - ask when you should typically be expecting to see your deposits made. No need to bring it up to the DOL at this time, you’re more concerned about them fixing the problem so the deposits show up more timely going forward.
This link talks about whistleblowers getting a cut of money they’ve gotten back for the government, but it sounds like it needs to be more than a million dollars. Interesting how people may be incentivized to wait, when the amount retrieved is less than that.
I would not go to DOL at this point. For what? Since you have a small plan, I would go to whomever is in charge and just ask. It could be that the company is making the transfers and the investment adviser is bogging down. Or the person who is responsible for the transfer is sitting on them. Etc.
How do we know this is a small plan? Did the OP tell us that?
Frankly, I would be far more interested in making sure my deposits were made in a timely fashion than thinking I might get some “monetary incentive” as a whistleblower.
I think it’s very reasonable for you to ask if these deposits can be made in a more timely manner.
If you are only willing to be a whistleblower for monetary gain…I would say…don’t. Your reason should be to get your accounts done sooner…not to make money as a whistleblower.
My opinion.
@VeryHappy the OP mentions plans with less than 100 employees in his posts. Is this considered “small”?
Yes.