Walter & Shuffain - Certified Public Accountants & Business Advisors

Remittance of Participant Deferrals

On January 14, 2010, the Department of Labor (DOL) issued final regulations on a safe harbor period for employers to deposit participant contributions on a timely basis. Under this final regulation, participant contributions (payroll withholdings) to a pension or welfare benefit plan will be treated as having been remitted timely when contributions are deposited to the plan no later than the 7th business day following the day on which amounts were withheld by the employer.

It should be noted that the issued guidance only applies to small plan filers (ordinarily those plans with under 100 participants). That being said, common sense tells us that it will be a difficult argument for a large filer to have a policy that does not remit contributions in a fashion that at least meets this guidance. Currently, the general rule has been that remittance must be on the "earliest date on which such contributions can reasonably be segregated from the employers' general assets."

Please note, the DOL takes the position that if you can do it once, you can do it again. Meaning, they look at your historical performance and determine your ability to "reasonably segregate" these assets by your earliest remittance date. If, half of the time, you remit the contributions to the trust the same business day that you run payroll and the other half of the time you remit within a few business days, they may determine that all remittances that are not on the payroll date are prohibited transactions. Accordingly, it is important that you maintain a written remittance policy and are apply this policy on a consistent basis.

If you believe your Plan may not be following the required guidance, the DOL offers a means of bringing your Plan back into compliance - the Voluntary Correction Program. To qualify for the program, you must act before your plan is under IRS/DOL inquiry. If you question whether your plan is in compliance or would like help correcting your Plan policies, call today and we can help make sure you fulfill your fiduciary responsibilities.