New Retirement Plan Deposit Rules

Published:

by Stacey L. Spencer, QKA, Manager, Employee Benefits Services Group

Effective January 14, 2010, the Department of Labor (DOL) has established a final safe harbor rule as to what constitutes a timely deposit of participant contributions to small employee benefit plans (those with fewer than 100 participants).  To be considered timely, employee contributions, including plan loan repayments, must be made to the plan by no later than the seventh (7th) business day following the time the employee could have otherwise received cash.

Previously, employers of all sizes were 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.  This rule was vague and led to confusion for some plan sponsors.  The new rule creates peace of mind for small plan sponsors by specifying a time period.

The safe harbor is available on a deposit-by-deposit basis, which means that a failure to satisfy the safe harbor for any deposit of participant contribution amounts to a plan will not result in the unavailability of the safe harbor for any other deposit to the plan.

The new safe harbor rule does not extend to large pension plans or plans with 100 or more participants. Large plans should continue to deposit contributions as soon as they can be reasonably segregated from the general assets of the employer.

The final rule was published in the January 14, 2010 edition of the Federal Register.