DOL Issues New Rules Governing Safe Harbor Deposits
In 2008, the Department of Labor (DOL) proposed new regulations on employee contributions deposited to a pension and welfare benefit plan. The regulation pertains to employers with fewer than 100 plan participants, and is designed to provide greater protection to employee funds.
Previously, there was no standard for timely deposit of employee contributions that are withheld by the employer, including 401(k) and Roth 401(k) contributions and loan repayments.. The absolute requirement was that the funds be deposited no later than the 15th of the next month following the date of payroll. However, during recent audits of employer plans, the DOL penalized some employers for not segregating employee contributions from company funds in a “reasonable time frame”, or “as soon as administratively possible.”
The new regulation sets a defined period of seven (7) business days for deposit of the funds. It is important to note that the deposits are considered timely if deposited within seven days, even if it is administratively feasible to do so more quickly. If you have been holding employee contributions and depositing them by the 15th of the following month, you will no longer be able to do so. Your deposit will now be required to be made no later than seven business days from the date of payroll, or the date the funds were withheld by the employer.
If you have questions about this regulation, or any aspect of your employer-sponsored retirement plan, please contact our office for help.
