DOL finalizes deposit safe harbor for small plans

The U.S. Department of Labor (DOL) recently finalized its rule that gives employers a “safe harbor” of seven business days in which to deposit participant contributions to a small pension plan and be deemed to have deposited them in a timely manner. Contributions to an ERISA pension or welfare benefit plan that are withheld from employees’ wages (for example, 401(k) contributions), are plan assets and must be deposited in the plan as soon as they reasonably can be segregated from the employer’s assets. The DOL’s “safe harbor” for small plans (fewer than 100 participants) presumes that participant contributions are deposited in a timely manner if deposited within seven business days from the date they are withheld from employees’ wages (75 Fed Reg 2068, January 14, 2010). There is no safe harbor for larger plans, so contributions should be deposited into the plan as soon as possible. Depending on a government enforcer’s assessment, “as soon as possible” for a larger plan could require a speedier deposit, or it could be as late as the 15th business day of the month following the month in which the contributions were withheld from the employees’ wages. Contact your retirement plan advisor with questions.