MEMORANDUM
From:
Lanigan, Ryan, Malcolm & Doyle, P.C.
Re:
Final Rule on Timeliness of Participant Contributions
Date:
January 19, 2010
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On January 14th, the Department of Labor (DOL) issued regulations that establish a safe harbor period for remitting participant contributions and loan repayments to a company’s retirement plan.
The safe harbor provision only applies to companies who sponsor retirement plans with 100 participants (employees who are eligible to participate in the plan) or less at the beginning of the plan year.
Under this final regulation, participant contributions to a pension or welfare benefit plan with fewer than 100 participants at the beginning of the plan year will be treated as having been made to the plan in accordance with the general rule (i.e., on the earliest date on which such contributions can reasonably be segregated from the employer’s general assets) when contributions are deposited with the plan no later than the seventh business day following the day on which such amount is received by the employer (in the case of amounts that a participant or beneficiary pays to an employer) or the seventh business day following the day on which such amount would otherwise have been payable to the participant in cash (in the case of amounts withheld by an employer from a participant’s wages).
Please note that the funds do not have to be allocated to individual participant accounts by the seventh business day, they simply need to be deposited by the employer into the plan.
The DOL has not extended the safe harbor provision to plans with more than 100 participants.
We advise our clients to review their procedures for remitting deferrals and make efforts to deposit the funds into the plan as soon as possible after each pay period, but no later than seven business days.
In the event that the company fails to remit participant funds into the plan timely, a “prohibited transaction” will occur.
The prohibited transaction will be subject to penalties and fines.
Please call Kelly Ryan at our office at (301) 258-8900 if you have further questions.