401(k) Employee Contributions: Deposit Rules & Fixes
- Michelle Marsh
- Jun 8
- 3 min read
When employees choose to put part of their paycheck into a 401(k), the employer must move that money into the 401(k) plan account quickly.
Some 401(k) plan documents also say exactly how fast the deposit must happen (for example, “within 5 days after payday”). If the employer doesn’t follow what the plan document says, that can be a plan operation failure.
IRS correction rules (EPCRS):
The IRS has a system for fixing certain retirement plan mistakes called EPCRS (Employee Plans Compliance Resolution System). EPCRS is basically a set of IRS-approved steps to help fix mistakes and make things right.
How RPCSI helps using EPCRS methods:
RPCSI uses EPCRS-based correction methods to help plan sponsors fix these kinds of mistakes.
RPCSI can help by:
Finding what went wrong (for example, deposits were made late)
Figuring out what needs to be paid in to fix it (including lost earnings, meaning the investment growth participants missed because the money was late)
Helping gather and organize the paperwork that supports the correction
Suggesting process improvements (like better payroll steps) to help prevent the problem from happening again
DOL Timing Rules:
Late deposits can also be an issue under Department of Labor (DOL)/IRS rules because employee 401(k) contributions are treated like plan money once they can be separated from the company’s money.
DOL’s basic rule: deposit the money as soon as you can.
Generally, deposits must be made as soon as administratively possible and for a large plan (more than 100 participants) the DOL and auditors use the timing to remit payroll taxes as the expecting timing to remit the payroll deductions to the investment platform.
For plans with fewer than 100 participants, there is a 7-business day safe harbor for employee contributions.
Timing for other employer contributions:
Employer contributions follow different timing rules than employee paycheck deferrals:
Matching contributions: usually must be made by the employer’s tax filing deadline (including extensions) to count for that tax year.
Other employer contributions (not match): also, generally must be made by the employer’s tax filing deadline (including extensions).
Your plan document may have more specific rules, so it’s important to check it. Regardless of the IRS deadline, the plan document language must be followed if it is written to have deposits made more frequently (per payroll, monthly, quarterly, etc.)
How to spot the problem:
Confirm what the plan is required to do “on paper” and then compare it to what’s happening in real life. Because deposit timing can be governed both by the plan document and Department of Labor/IRS expectations.
The quickest way to identify an issue is to line up the written rules and actual payroll-to-deposit practices and see whether they match.
Look in the plan document for deposit timing rules.
Compare that to what actually happened.
Example: If the plan says deposits must be made weekly, but the company deposits every two weeks, that can be a mistake because the plan wasn’t run the way it was written.
How to fix the problem:
Fixing a late deposit issue usually includes:
Find which deposits were late and who was affected.
Calculate lost earnings (the growth that would have happened if the money was deposited on time).
Deposit any missing amounts and lost earnings into the plan.
Improve payroll and deposit steps so it doesn’t happen again.
RPCSI supports the full correction process using EPCRS-based methods, including reviewing data, helping with calculations, documenting the correction, and recommending practical improvements.
If you’re not sure whether your employee deferrals are being deposited on time, or you’ve identified late deposits and need a clean, well-documented correction, RPCSI can help you move from “possible issue” to “resolved and repeatable.”
Our team supports plan sponsors through the full process using EPCRS-based methods: identifying what went wrong, calculating and funding missed amounts and lost earnings, organizing the correction file, and tightening payroll and deposit procedures to reduce the risk of future errors. Contact RPCSI to review your deposit timing practices and build a practical correction plan.
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