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Retirement Regulation Change Alert
– March 11, 2010
The Department of Labor (DOL) issued final regulations on January 14, 2010, providing a safe harbor rule for the timely deposit of employee 401(k) contributions and loan repayments. This regulation requires plan sponsors with fewer than 100 eligible participants to deposit employee 401(k) contributions and loan repayments to their plan no later than the 7th business day following the payroll date.
If the deposit of deferrals is made after the 7th business day, then the plan assets are deemed to be commingled with the employer’s general assets and the result is a prohibited transaction. As a result, the plan sponsor may be required to contribute lost earnings and pay excise taxes on the amounts involved.
At this time, the DOL's ruling does not extend to plans with more than 100 eligible participants. Large plans with more than 100 eligible participants are still required to comply with the prior deposit rule. During various presentations, the DOL has suggested that large plan sponsors may be subject to an even faster deposit requirement than the 7 business days. For this reason we recommend that all plan sponsors comply with the new regulation and deposit employee 401(k) contributions by the 7th business day following the payroll date.
If you have any questions regarding the Department of Labor's 7th business day safe harbor rule, please contact your Warren Averett advisor or a member of Benefit Consultants, LLC, an affiliate of Warren, Averett, Kimbrough & Marino, LLC.
Bill Presson, QPA, QKA
Benefit Consultants, LLC
205.769.3369
Amye Rockett, QKA
Benefit Consultants, LLC
205.769.3393
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