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Plan Insight

MARCH 2010 Newsletter

DOL Finalizes 7 Business Day Safe Harbor Rule for Small Plans

New Department of Labor regulations on the timely deposit of employee contributions

Effective January 14, 2010 the DoL issued final regulations for retirement plans with fewer than 100 participants. Plan sponsors should review their process to ensure deferral contributions are segregated from the employer’s assets timely, but no later than 7 business days following receipt, or following the date the amounts would otherwise have been paid to the employee as compensation.

The old regulation was often misinterpreted by plan sponsors. Initially, regulations were issued by the DoL in 1988 defining when employee contributions become plan assets for purposes of ERISA. In 1996, the regulations were amended for plan sponsors to deposit employee deferrals into plans as of the earliest date on which such contributions can reasonably be segregated from the employer’s assets, but not later than the 15th business day of the month following the month in which the participants’ contributions are withheld from the employees’ compensation (29 CFR 2510.3

While most plan sponsors currently remit employee elective deferral dollars on a ‘payroll’ basis, those who do not should consider changing their remittance process to qualify for this safe harbor. If this affects your company, please call our office for complete details and guidance.

 

Details: The ASPPA Government Affairs Committee Publication - January 20, 2010 :: No. 10-02

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Information is provided for review and consideration only. Please consult legal and tax advisors for practical advice pertaining to your business and personal situations.

This page was last reviewed and/or updated on Friday, August 13, 2010 10:46 AM

 
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