In recent years, the timely remittances have become quite the hot topic with the Department of Labor (DOL). The guidelines say that employers are required to remit employee deferrals to the plan no later than the 15th business day of the month following the payroll date.
The DOL has not provided a safe harbor for these deposits, rather the rules set a maximum deadline; so, deferrals should be remitted as soon as administratively feasible. In other words, these amounts should be remitted to the plan as soon as possible. If an employer has consistently remitted their deferrals in zero days, but had a couple of off payrolls during the year where it took four days to remit the deferrals, those could be considered late if audited by the DOL.
It should be noted, however, that the DOL provides a seven-business day safe harbor rule for employee contributions to plans with fewer than 100 participants.
As with most ERISA rules, the purpose is to protect the participants in the plan. If the deferrals are not remitted in a timely manner, the participants could lose out on the earnings on those late deferrals. If the deferrals are considered late by the DOL, the employer could be responsible for any lost earnings that resulted from the late remittance.
To avoid issues with the DOL, you should develop internal controls to ensure deferrals are remitted to the plan in a timely manner. It is also important to incorporate controls ensuring this is done consistently from payroll to payroll and that the absence of any employees would not cause a lag in the remittance time.
Courtney A. Greshner, CPA