On February 29, 2008, the Department of Labor (DOL) issued proposed regulations with regards to the timely deposit of employee contributions to a company’s retirement plan. Under the regulations, companies with less than 100 participants (as of the beginning of the plan year) will be required to deposit employee contributions to the plan within 7 business days from the date of withholding. Failure to do so would result in late deposit penalties and interest.
Prior to the proposed regulations, deposits had to be made by the earliest date from which the contributions could be segregated from the employer’s assets, but not exceeding the 15th business day of the month following the month in which the participants’ contributions were received by the employer. The DOL decided to change the regulations because it felt the “earliest date” wording was ambiguous and many employers interpreted it to mean that they had until the 15th day of the following month to deposit the contributions. The DOL hopes to clear up this confusion with the new regulations.
The regulations will officially go into effect on the date of the publication of the final regulations, however, the DOL is implementing them immediately. Further information can be found on the DOL Web site. Larger companies could be also be affected, as the DOL is considering whether the proposed regulations would be necessary for them as well. As always, NADART is available to answer questions regarding this topic or any other retirement plan questions in general. You can contact a NADART Representative by calling (800) 462-3278, ext. 7161 or e-mailing nadart401k@nada.org.