 NEWSLETTERS Volume 9, Issue 1 .................... February 2009 NEW SAFE HARBOR 401(k) DEPOSIT RULES On February 28, 2008, the Department of Labor (DOL) announced proposed rules to provide greater protection for employee contributions deposited to pension and welfare benefit plans with fewer than 100 participants by proposing a safe harbor period of seven business days following receipt or withholding by employers. When an employer withholds employee contributions (including 401(k) contributions, Roth 401(k) contributions, and loan payments) from an employee’s pay, the monies must be segregated from the employers assets and deposited into the plan. Prior to this announcement the rules regarding the timing of how long this process can take were: Employers are required to deposit employee contributions that are withheld from an employee’s pay to the retirement plan as soon as administratively feasible, but no later than the 15th business day of the following month. There has been confusion about whether employee contributions deposited by the 15th business day of the following month are considered deposited timely since that does not address what timing would be administratively feasible for a company. By creating the safe harbor deposit rules, the DOL shortened the longest time frame by which employee contributions must be deposited. The safe harbor deposit rules state that if employee contributions withheld from an employee’s pay are deposited within 7 business days of the date they were withheld, the contributions would be deposited timely. The proposed rules will become effective the date the DOL publishes final regulations, but can be followed immediately. It is expected once the final regulations are published, the DOL will challenge deposits made after the safe harbor 7 business day time frame. Note that under the safe harbor deposit rules, contributions are considered timely if deposited within 7 business days even if it is administratively feasible for the employer to deposit the contributions more quickly. If you have been depositing employee contributions by the 15th business day of the following month, please review the deposit process. Determine if you can satisfy the 7 business day time frame. If you can not, determine how long administratively feasible is for your company and note the process. Then begin depositing employee contributions withheld from an employee’s pay as soon as administratively feasible, or by the 7th business day following the date the monies were withheld from the employee’s pay. Note if your payrolls are frequent, such as weekly or biweekly, it is not considered timely to hold employee contributions and make one deposit for multiple payrolls. Deposit each payroll as soon as administratively feasible or by the 7th business day following the date the monies were withheld from the employee’s pay.
If you have questions about the
safe harbor deposit rules contact Administrative Retirement Services, Inc. © Administrative Retirement Services, Inc. 2009 Published by Administrative Retirement Services, Inc., Copyright 2001 by Administrative Retirement Services, Inc. Reproduction in whole or in part is prohibited except by written permission. All rights are reserved. Information has been obtained by Administrative Retirement Services, Inc. from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, Administrative Retirement Services, Inc. or others, Administrative Retirement Services, Inc. does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or the result obtained from the use of such information. Readers should seek specific advice before acting with regard to the subjects mentioned here. |