In January 2010, the Department of Labor (DOL) released final regulations defining when employee contributions must become plan assets under the Employee Retirement Income Security Act (ERISA). Previously, employers of all sizes needed to transmit employee contributions to pension plans as soon as they could reasonably be segregated from the general assets of the employer, but no later than the 15th business day of the month following the month in which contributions are received or withheld by the employer.
Under the new regulations, a safe harbor deadline for employee contributions has been implemented for small plans (those with few than 100 participants). Contributions for such plans will be treated as having been made “on the earliest date on which such contributions can reasonably be segregated from the employer’s generals assets” if such amounts are deposited into the plan no later than the 7th business day following the day on which such amounts would otherwise have been payable to the participant in cash. Participant contributions to a small plan will be deemed to comply with the law if the above mentioned requirements are met.
The 7 business day safe harbor for remittance of participant contributions also applies to remittances of participant loan repayments that are made to plans with less than 100 participants.
The DOL did not expand the safe harbor to cover plans with 100 or more participants due to a lack of information and data sufficient to evaluate current practices of such employers and assess the costs, benefits, and risks to participants associated with extending the safe harbor to large plans.
Written by Summit Blog Admin
