Can an employer use employee 401k contributions to pay business expenses?

The money comes out of my check but rarely gets contributed on time. I recently looked online at my account and saw a contribution on jan 19th. Later I found out that the contribution was for the month of november of 06. By law the money is supposed to be in the 401k account 15 business days past the month. Does the employer have access to using employee 401k contributions for business expenses? My coworker was told by the plan administrator that "the money wasn't there" and "they were doing the best they can" to send the contributions. I am only assuming that this is what had happened (to pay expenses) What are the legal rights in this? Whats the point of having money taken out every week when it doesnt even go in when its supposed to. Would I still get charged the monthly fee if I stop contributing?

Can an employer use employee 401k contributions to pay business expenses?
This sounds VERY illegal. Doing their best is a crap excuse. I would definitely look into legal action.
Reply:That is illegal. The contribution that is deducted from your pay is YOUR money, not the company's. Please call a lawyer or the labor board in your state immediately. Your employer is basically stealing from you.
Reply:No, it's a violation of ERISA. I would talk to an attorney.
Reply:This is a serious red flag indicating that your employer is not able to meet his financial obligations. Start looking for a new job immediately.
Reply:The 15 days that you refer to is the absolute LATEST that it can be contributed but it should be done as soon as administratively possible. The DOL (they govern this aspect of 401k's) say 5 days after a payroll is more than enough for 99% of the companies. Your employer would likely be subject to penalties and you are definately owed income. One thing to consider for others reading this is your company may have a checking account specifically for the plan...if it's in that checking account it's considered contributed. It doesn't have to be in your individual account within the 5 day period.





They are more than welcome to use the money for business expenses so long as they put it into your account within that reasonable (5 day period). Most companies don't have that kind of cash flow though.





The point of continuing to contribute is that it's still being put in. And even though it's late it's still relatively regular so you are still kind of investing using dollar cost averaging. Though the money that is not invested IS at risk. This is what I'd do...send an anonymous letter (written on computer) to the plan administrator detailing out the 15 day rule and the fact that trustees can be held personally liable for egregious acts such as this. This means your employer can be sued and can't use his corporation status as a shield. Also let them know that late contributions are subject to interest payments and that while you don't expect them to be contributed on previously late payments, you will be forced to go to the DOL if it continues.





Then...look for a new job. If they are using 401k deferrals then they aren't doing so hot financially.
Reply:I would say that you are seeing about a dozen red flags here. First of all, I do not believe that it is legal for a business to use employee contributions to a 401 k to help pay thier business expenses. It may be legal (I am not certain of this) for them to use the funds that should be used to match your contributions (alot of employers will match an employee 401k contribution to a certain limit) for expenses and match what you put it at a later time. If they are taking employee contributions, this probably is a signal of a much larger problem, like a business that can't meet its financial commitments and/or one with questionable accounting practices. Both of these are serious issues. I would definitely look into this in more detail before actually taking any action. Make a record of everything that happens, ask lots of questions, and seek legal advice if this continues to happen.
Reply:no its not right and your employer knows it @!1
Reply:you might want to do something to protect yourself like find a job in a company thats not tettering on banckruptcy. good luck, because "doing the best they can" is a little out side the law.no, way outside the law.

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