On January 14, 2010, the Department of Labor issued a final rule establishing a “safe harbor period” of seven business days as a reasonable time frame for depositing employee contributions and loan repayments into retirement plans
Under this regulation, employers will be in compliance with ERISA rules if they deposit employee contributions within seven business days after the payroll date. The final ruling applies only to pension and welfare plans with fewer than 100 participants.
The seven-day safe harbor rule doesn’t apply to plans with 100 or more participants. For those plans with more than 100 participants, employers are still required to transmit participant contributions as soon as the funds can be segregated from the employer’s other assets, and deposited no later than the 15th business day of the month following the month in which the contribution was withheld.
This safe harbor provides assurance that employers are depositing employee contributions within the time frame established by the Department of Labor regulations. The Department of Labor will impose penalties on employers who are found to be in violation of this remittance schedule. If you believe you have not deposited employee elective deferrals within the safe harbor period, your financial advisor can assist you in making a voluntary correction through the Department of Labor.
This article was originally published in Illuminations: Facts & Figures from people with a brighter way, a Rea & Associates enewsletter, 1/20/2010.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.