Safe with Seven
Posted by Andrea Vassiliadis on Tue, Mar 16, 2010 @ 08:44 AM
A lot of questions are coming up lately about the new final regulations, effective January 14th, 2010, on the timely remittances of employee contributions. While it is important that small businesses* are aware of these new rules, it may not change their procedures.
The rules have always stipulated that contributions must be made on the "earliest date on which such contributions can reasonably be segregated from the employer's general assets". (In no event can this be beyond the 15th day of the following month). A big DOL audit "pain point" these days is assessing what this really means with today's technology so widely available.
Under this new Safe Harbor provision, this rule is automatically deemed to be satisfied if the amounts are deposited into the plan no later than the 7th business day following the day on which such amounts would otherwise have been payable to the participant in cash. This applies to loan repayments as well.
A couple of other points:
- This Safe Harbor is optional, but if not elected then the company is held to the original standard.
- The rules apply on a deposit-by-deposit basis, and can be applied in the same manner to multiple employer and multi-employer plans.
So no reason to panic small businesses! Many of you are already doing the right thing just by remitting contributions on a payroll-by-payroll basis. For those of you who are not, it's probably time to take a closer look and take advantage of that Safe Harbor.
* A small business is defined as a company with less than 100 participants at the beginning of the plan year.