As 401(k) audits ramp up across the country, plan sponsors have a critical opportunity to address common compliance issues before they turn into audit findings. Based on hundreds of audits performed by PriceKubecka, one issue consistently rises to the top.👉Late 401(k) deposits.
What Is a Late 401(k) Deposit?
When employees defer part of their paycheck into a 401(k), those funds must be deposited into the plan as soon as administratively possible.
Yes, there’s a rule about the 15th business day of the following month—but here’s what most plan sponsors miss: That’s NOT a safe harbor. It’s the absolute maximum deadline.
The real standard is: Deposit contributions as soon as you reasonably can.
Why This Trips Up Plan Sponsors
Let’s say you typically deposit contributions 3 days after payroll. That becomes your benchmark.
So if the next deposit happens 10 days after payroll… That’s a late deposit—even if it’s before the 15th business day.
This is where most companies get flagged in audits.
What Happens If You Have Late Deposits?
If your auditor identifies late deposits, you’re required to:
- Calculate Lost Earnings – Determine how much participants missed out on because their money wasn’t invested.
- Make Participants Whole – You must fund the difference. This is your correction (penalty).
- Report It – Late deposits are disclosed in:
- Your Form 5500
- Your audit report
👉 And yes, this gets the attention of the Department of Labor (DOL).
When Late Deposits Become a Bigger Problem
Occasional delays happen. But repeated late deposits? That’s a pattern—and a red flag. Unchecked, this can:
- Trigger DOL scrutiny
- Lead to expanded investigations
- Create ongoing compliance risk
How to Fix Late Deposits (For Good)
The solution is simple but it requires discipline.
1. Make 401(k) deposits part of payroll
Treat them like payroll taxes. Same day. No exceptions.
2. Establish a consistent timeline
Whatever your “as soon as possible” timeline is—stick to it.
3. Build redundancy into the process
- Train a backup processor
- Ensure coverage during PTO or turnover
4. Document everything
If a delay happens, it’s vital to record why it occured and what corrective action was taken.
5. Align systems and providers
Work with your payroll provider and recordkeeper to:
- Define your earliest deposit timing
- Ensure systems support it
Bottom Line
Late deposits aren’t complicated—but they are high-risk and highly visible.
The good news? They’re also one of the easiest audit findings to eliminate entirely.
Work With a 401(k) Audit Specialist
If late deposits showed up in your audit—or you want to make sure they don’t next year—PriceKubecka can help. We specialize in streamlined, flat-fee 401(k) audits that:
- Minimize your time (often <5 hours)
- Identify issues early
- Help you fix them for good
👉 Let’s make next year’s audit your easiest one yet.
Frequently Asked Questions
What is considered a late 401(k) deposit?
A late 401(k) deposit occurs when employee deferrals are not deposited into the plan as soon as administratively possible, even if they are deposited before the 15th business day of the following month.
Is the 15th business day rule a safe harbor for 401(k) deposits?
No. The 15th business day is the maximum deadline, not a safe harbor. Employers must deposit contributions as quickly as they reasonably can, often within a few days of payroll.
How do you correct late 401(k) deposits?
To correct late deposits, plan sponsors must:
- Calculate lost earnings for participants
- Deposit those earnings into participant accounts
- Report the issue on Form 5500 and audit disclosures
Can late 401(k) deposits trigger a DOL audit?
Yes. Repeated or significant late deposits can attract attention from the Department of Labor (DOL) and may lead to further investigation or penalties.
How can employers prevent late 401(k) deposits?
Employers can prevent late deposits by:
- Depositing contributions at the same time as payroll
- Creating a consistent, documented process
- Training backup personnel
- Coordinating with payroll providers and recordkeepers
