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Timing of Contributions is Critical
The DOL (Department of Labor) has made timely submission of participant contributions a top priority. The law reads that participant contributions must be remitted by the earliest date:
  • Contributions can reasonably be segregated from the general business account
  • Not to exceed 15 business days after the month in which contributions are withheld
DOL's timing is focusing on when participant monies can be segregated from the business account. The 15 business days are NOT a "safe harbor".
Therefore, if your payroll is bi-weekly, your participant contributions should be made bi-weekly. If, for example, you can accommodate submitting these contributions seven days after your payroll, DOL expects you to routinely and consistently submit your contributions within the seven days after each payroll.
Untimely contributions must be reported on the annual form 5500 which is filed with qualified retirement plans. Not complying with the DOL timing requirements can lead to serious penalties both civil and criminal under ERISA. IRS may view failures to follow the plan document as a plan disqualifying issue. And plan fiduciaries can also be held personally liable for non-compliance.
Review your plan procedures today and make the necessary changes to ensure timely remissions.
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Timing of Contributions is Critical
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