Provided by your plan administration partner:
On February 29, 2008, DOL Announced New 401(k) Deposit Safe Harbor:
Process your 401(k) deferrals and loan payments to ensure the deposit posts to the Plan's account within 7 days of payroll pay
DOL has announced that they will consider your Plan in deposit compliance if 401(k) deferrals have been deposited by the 7th business day after payroll is paid.
Summary:
Elaboration:
- Rule Applies if Your Retirement Plan has less than 100 Participants
- Rule Applies if you remit regular 401(k) deferrals from payroll
- Process your 401(k) deferrals and loan payments immediately following payroll to ensure deposit posts to trust account prior to the seventh business day
In the proposed rule released last Friday, the DOL proposes changing Labor Reg. 2510.3-102(a) by adding loan repayments and adding a new subsection containing a 7-day safe harbor time period. These changes would be reflected as follows:
- (2) Safe harbor. For purposes of paragraph (a)(1) of this section, in the case of a plan with fewer than 100 participants at the beginning of the plan year, any amount deposited with such plan not later than the 7th 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), shall be deemed to be contributed or repaid to such plan on the earliest date on which such contributions or participant loan repayments can reasonably be segregated from the employer's general assets.
- Does not apply to large plans
- Eliminates DOL examiners making arbitrary decisions about what was reasonable under the old rules.
Action Options:
- Accounting is Check Based, Do this:
- Open a checking account in the name of the Retirement Plan Trust
- Put the Trust Tax ID on as identification
- Instruct your payroll company. When it generates payroll, the deferral amount is automatically paid to this checking account
- Write a check from the Trust checking account to your regular recordkeeper in the same manner as currently performed
OR:
- Transact Business with ACH Deposits. Do This:
- Remit the information (upload, transmit, email) for deferrals to the recordkeeper as soon as the report is available
- If information is available prior to your pay date, make sure deferrals are not accidentally drafted prior to the pay date.
- Check the recordkeeper contract to see how many days they have to process contributions
- 7 business days – 3 days processing = must upload by business day 4 after payroll date
Reach Customer Service at 858-748-6500 with questions
Plan Design 858-218-3440
Contact Us
In this Announcement:
Introduction
Elaboration
Action Options
Accounting is Check Based
Transact Business with ACH Deposits
Quick Links...
Innovative Pension
14251 Danielson Street
Poway, CA 92064
For Assistance,
Call Customer Service: 1.800.98PENSION
or email helpdesk