I don't have a better legal answer for you, but it's a really interesting question, so I ran a few numbers. Assuming a 7% return rate, and you get contribute monthly, this represents -0.19% in missed investment return on what you invest every year. If you're investing $18,000 per year into your 403b, that's ~$35/year compared to instant deposits.

My guess is that the reason is simply long processing time or incompetence. But given a large enough organization, this is real money we're talking about. Maybe the Office Space guys are at it again, but they got the decimal point right this time, haha.