More Late 401(k) Plan Contributions Found by Auditing Firm This Year, Triggering Additional Department of Labor Fees

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Timely deposits of 401(k) plan contributions seemed to be tougher for plan sponsors this year, according to Buchbinder Tunick & Co. a CPA firm with expertise in auditing employee benefit plan audits. "This year, we found more delinquent participant contributions than we have uncovered in the recent past," notes Joseph Musher, CPA, a Buchbinder Tunick partner. The Department of Labor deadline for plan sponsors to file Form 5500, including an audited statement for plans with 100 or more participants, was Oct. 15th.

The regulation states that the monies should be deposited as soon as it is practical to physically segregate them, 'but in no event more than 15 days' after the close of the month. In this computer age, one can physically segregate the monies quickly. If it isn't done within five days, the deposit is considered to be delinquent and it has to be reported as a prohibited transaction.

    Numerous acquisitions, which require merging two separate 401(k) plans, and switching to new third party administrators accounted for most of the errors. Plan sponsors made clerical errors, too, which delayed deposits. An irregularity triggers a more through audit. As Mr. Musher explains. "When we see such errors, we increase the number of records we test in the auditing process. That may upset the client, but it is our job."

Marc Newman, CPA, who is also a partner at Buchbinder Tunick, says another issue of concern is that many 401(k) plan sponsors mistakenly believe that there is a "safe harbor" rule that allows them to deposit participant contributions up to 15 days after the end of the month. "The regulation states that the monies should be deposited as soon as it is practical to physically segregate them, 'but in no event more than 15 days' after the close of the month. In this computer age, one can physically segregate the monies quickly. If it isn't done within five days, the deposit is considered to be delinquent and it has to be reported as a prohibited transaction." The Department of Labor charges plan sponsors a separate fee, which is paid by the employer, not the plan, for prohibited transactions.

To learn more about the special requirements of 401(k) plan audits, visit http://www.buchbinder.com/html/401k.htm.

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Jeannie Mandelker
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