TTB: Employer Remission of 401k money

[buzzardbreath]

The following is paraphrased from TTB:

For a 401k, the employee portion withheld must be remitted by the 15th business day following a payday.

The employer's portion is due by the date of the "return."

Question: What is meant by "return" in the above context?

1120? 941? 5500? None of these?

[ATSMAN]

EBSA News Release: [01/13/2010]
Contact Name: Gloria Della
Phone Number: (202) 693-8664
Release Number: 10-0056-NAT
US Department of Labor issues final safe harbor rule on employee contributions to small pension and welfare plans

WASHINGTON — The U.S. Department of Labor today announced the publication of a final rule to protect employee contributions deposited to small pension and welfare benefit plans with fewer than 100 participants by providing a safe harbor period of seven business days following receipt or withholding by employers.

"This rule will give employers greater clarity in remitting participant contributions to small pension and welfare plans in a timely manner," said Phyllis C. Borzi, assistant secretary of labor for the department's Employee Benefits Security Administration. "We estimate participant accounts could grow by $19 to $44 million as a result of these rules."

Currently, employers of all sizes must transmit employee contributions to pension plans as soon as they can reasonably be segregated from the general assets of the employer, but no later than the 15th business day of the month following the month in which contributions are received or withheld by the employer. The latest date for forwarding participant contributions to health plans is 90 days from the date on which such amounts are received or withheld by the employer.

The final rule amends the participant contribution rules to create a safe harbor period under which participant contributions to a small plan will be deemed to comply with the law if those amounts are deposited with the plan within seven business days of receipt or withholding. The final rule is consistent with the proposed rule. The department did not expand the safe harbor to cover plans with 100 or more participants due to a lack of information and data sufficient to evaluate current practices of such employers and assess the costs, benefits and risks to participants associated with extending the safe harbor to large plans.

This is the rule for small 401(k) plans that my clients use. Not sure what they meant by return. The witheld money is sent to the plan provider or the TPA administering the plan.

[Burke]

The following is paraphrased from TTB:
For a 401k, the employee portion withheld must be remitted by the 15th business day following a payday.
The employer's portion is due by the date of the "return."
Question: What is meant by "return" in the above context?
1120? 941? 5500? None of these?

I have a client who works for a small employer who has a SIMPLE plan. While the employee's contributions are deposited timely, his matching portion ("the employer's portion") is generally not made until March of the following year, prior to the due date of his tax return. I do not know what type of return he files, whether it is a Schedule C, 1120, or 1120-S. When this was questioned by the employee, his attorney (or CPA, I do not know which) backed up this procedure as perfectly legitimate under the law.

[Bees Knees]

Question: What is meant by "return" in the above context?

The context has to do with the employer's tax return that takes a deduction for the contribution made on behalf of the employee. Thus, if the employer files Form 1120, the contribution has to be made by the due date of the Form 1120.

[Golden Rocket]

Bureauspeak?

EBSA News Release: [01/13/2010]
Contact Name: Gloria Della
"This rule will give employers greater clarity in remitting participant contributions to small pension and welfare plans in a timely manner," .... "We estimate participant accounts could grow by $19 to $44 million as a result of these rules."

All of us know what "coachspeak" or "corporatespeak" is, but I'm having trouble making sense out of this press release by a bureaucrat.

Firstly, how much more clear could the 15-day requirement be? The statement suggests a 7-day "safe harbor". And this is supposed to "help" employers?

And secondly, this is supposed to grow participants accounts by more than double by virtue of a quicker deposit? If so, this growth is short-lived by only a few days before wiping out the impounded balance.

It is one disgusting thought to follow the shallow mindset of the gubbermint when issuing a press release, it is even worse to be insulted when they think we haven't got enough sense other than to spoon up the garbage they are throwing out.

Have I missed something, or am I really that stupid?

[Burke]

And I am supposing that this "safe harbor" rule did not eliminate the "no later than the 15th day of the following month" rule? Why would an employer WANT to use the 7-day rule when he can effectively hold the funds (depending on the payroll date) for as much as 45 days in some cases?

[buzzardbreath]

Answered the Question

The context has to do with the employer's tax return that takes a deduction for the contribution made on behalf of the employee. Thus, if the employer files Form 1120, the contribution has to be made by the due date of the Form 1120.

Thanks for clearing this up. This answers the question.