Benefit Insights | Automatic Enrollment Is On The Rise Summer 2019 | Page 3

COMPLYING WITH SAFE HARBOR DEADLINES

All 401(k) plan contributions have deposit deadlines, and it’s up to 401(k) fiduciaries to meet them. Yet, many are unclear about the deadlines applicable to their 401(k) plan. That confusion can

Most of the confusion surrounds the deadline to deposit amounts withheld from employee wages, i.e., 401(k) pre-tax, 401(k) Roth, and/or participant loan repayments. The Department of Labor (DOL) set forth the rules to comply with the safe harbor for depositing these amounts in 29 CFR 2510.3-102. The rule states that the deposit deadline is “the earliest date on which such amounts could reasonably be segregated from the Employer’s general assets but in no event later than the 15 th business day of the month following the month in which the participant contributions were withheld or received by the Employer.” In actuality, the DOL focuses heavily on the earliest date on which such amounts could
reasonably be segregated from the Employer’s general assets, which in most cases is earlier than the 15-day timeframe mentioned in regulation.

MAKING TIMELY DEPOSITS IS A FIDUCIARY DUTY

Fiduciaries are responsible for making timely deposits. Failing to do so results in what’s called a “prohibited transaction” because the DOL views those contributions to be improperly commingled with your general funds. In the event that a late contribution occurs, the plan sponsor must:

•  Make up earnings that the employee contributions may have accumulated had they been deposited on time
•  Pay an accompanying 15% excise tax

CLARITY FOR SMALL PLANS

On January 13, 2010, the DOL finalized a safe harbor deposit deadline for “small” plans—those with less than 100 participants at the beginning of the given year. Contributions to the plan are considered timely if deposited by no later than the 7th business day following the pay date.

Although failing to follow the safe harbor deadlines does not necessarily violate any regulations, you may be required, upon audit, to demonstrate that all deposits were made as soon as administratively feasible for your company and/or industry.

Depositing contributions within the new safe harbor guidelines easily lead to late contributions. automatically satisfies the timeliness requirement and eliminates the interpretation of the previous guidelines.


Upcoming Compliance Deadlines for Calendar-Year Plans (12/31)

15 th September 2019

Required contribution to Money Purchase Pension, Target Benefit Pension, and Defined Benefit Plans (8-1/2 months after plan year-end) and 2018 employer profit sharing and match contributions for those sponsors who filed a corporate tax extension.

30 th

Summary Annual Report due to participants for plans with 12/31 plan year-end. (Due to participants nine months after plan year end or two months after filing Form 5500.)

1 st October 2019

401(k) Plan Safe Harbor Notice (must be provided between October 1 and December 1 for plans with a 12/31 plan year-end).

15 th

The deadline for filing Form 5500 and Form 8955-SSA for calendar year-end plans on extension. contributions so that corrections are handled properly.