Employment: DOL Finalizes 7-Business-Day Safe Harbor For Depositing Participant Contributions and Loan Repayments in Small Employee Benefit Plans


The U.S. Department of Labor (DOL) recently issued a final “safe harbor” rule that allows employers sponsoring pension and welfare benefit plans with fewer than 100 participants to take up to seven business days to deposit employee contributions to plan accounts. Under this new rule, employers are treated as having made a timely deposit if the contributions are deposited within seven business days after they (i) are received (if the contributions are paid to the employer) or (ii) would have been paid in cash (if the contributions are withheld from wages). The effective date for the new rule is January 14, 2010.

Previously, the general rule was that employers of all sizes were required to transmit employee contributions to retirement plans, such as 401(k)-style defined contribution 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 were received or withheld by the employer. The latest date for forwarding participant contributions to health plans was 90 days from the date on which such amounts were received.

Currently, an employer that experiences problems with complying with the safe harbor will be subject to the general rule described above. In addition, the safe harbor is applied on a deposit-by-deposit basis. Therefore, the failure to comply with the safe harbor for a particular deposit will not effect other deposits. Further, it is noteworthy that the safe harbor applies to multiemployer and multiple employer plans. The safe harbor also extends to loan repayments made by plan participants.

In order to ensure compliance with the safe harbor, we recommend that employers take the following actions:

  • Employers whose plans have less than 100 participants should ensure that their payroll vendor (if payroll is done externally) or their internal payroll department is aware of the new final rule, and that all employee contributions and plan loan repayments are made by no later than the seventh business day if they wish to use the safe harbor.
  • Employers whose plans have 100 or more participants, or employers with small plans electing not to use the safe harbor, should ensure that all employee contributions and plan loan repayments are deposited by the earlier of the date those contributions and/or loan repayments can be segregated from employer assets or the 15th business day of the following month.

By Jeff Rambach, jrambach@dsda.com

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Justin B. Munn

Justin B. Munn

Justin represents clients throughout Oklahoma in family law, civil litigation, guardianships, adoptions, estate planning, trust and probate matters. 

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