The ERISA consultants at the Retirement Learning Center Resource regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings plans. We bring Case of the Week to you to highlight the most relevant topics affecting your business.
A recent call with a financial advisor from North Carolina is representative of a common inquiry related to depositing employee salary deferrals. The advisor asked:
“I get confused by the various deposit deadlines for employee salary deferrals. Can you summarize them for me, please?”
Highlights of the Discussion
The following table summarizes the Department of Labor’s (DOL’s) deferral deposit deadlines for various plan types.
|
Plan Type |
Deadline |
Citation |
|
Small 401(k) Plan
A plan with fewer than 100 participants
|
The plan sponsor has seven business days following the day on which such amounts were withheld to deposit them to the plan. |
|
|
Large 401(k) Plan
A plan with 100 or more participants |
The plan sponsor must deposit deferrals as soon as they can be reasonably segregated from the employer’s assets, but not later than 15 business days following the month the deferrals are withheld from the participants’ pay. |
DOL Reg. 2510-3-102(a)(1) and (b)(1)
|
|
Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA |
Deferrals must be deposited within 30 days after the end of the month in which the amounts would otherwise have been payable to the employee. |
|
|
Salary Reduction Simplified Employee Pension (SAR-SEP)
An IRA-based plan with 25 or fewer employees. |
The plan sponsor has seven business days following the day on which such amounts were withheld to deposit them to the plan. |
Conclusion
The DOL’s top compliance concern is the timely deposit of employee salary deferrals to their respective plans. Plan sponsors and service providers must ensure policies and procedures are in place to ensure deferral deposit deadlines are met.
Any information provided is for informational purposes only. It cannot be used for the purposes of avoiding penalties and taxes. Consumers should consult with their tax advisor or attorney regarding their specific situation.
©2019, Retirement Learning Center, LLC. Used with permission.
