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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

Content is the opinion of the author and does not represent the position of any other person or entity. Information is from sources believed to be reliable but cannot be guaranteed.

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401(k) deposit processing time

originally posted: 6/07/2005  revised: 11/23/2010

Q: I participate in a 401(k) plan at work but sometimes it takes up to a month for salary-deducted savings to show up in my investment account. My employer says that they have 15 days by law to transfer the money and the rest is just ordinary processing time. Is this right?

A: Actually, the IRS recently warned employers that the 15-day “safe harbor” period that many rely on is actually a fallacy that is not based in law. The law actually says that funds should be transferred as soon as reasonable possible. Now that virtually every payroll service has the ability to make such transfers electronically in real time, the standard processing time for your money is likely to be reduced to one or two days.

The bottom line is that there is not much you can do, but your employer should be aware that a 15-day processing time is likely to invite an IRS audit of the plan in the future. It would be smarter to fix the problem in the current payroll accounting system that is causing this problem.

Deposits to 401(k) plan should be made within 15 days after withholding the funds from paychecks.

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