Deposit Timing

Timely deposit of employee elective deferrals and loan repayments is critical for plan compliance. Employers must make every effort to deposit these amounts into the retirement plan as soon as possible after they are withheld from an employee’s pay.

DOL Timing Rules

Department of Labor (DOL) regulations require employee elective deferrals and loan repayments to be deposited into the plan account by the earlier of:

  • As soon as the amounts can be segregated from company assets; or
  • No later than the 15th business day of the month following the month in which the amounts were withheld

In most cases, the 15th business day represents the maximum allowable timeframe, not the earliest practical deposit date. With today’s electronic banking and payroll systems, contributions can often be deposited within just a few days.

Safe Harbor for Small Plans

Small plans (those with fewer than 100 participants with balances) may follow a special “safe harbor” rule where employee elective deferrals are deemed timely if they deposited within seven (7) business days from when they are withheld from the employee’s pay. While this rule only applies to small plans, it generally represents the longest a plan should wait to deposit employee deferrals. Deposits should always be made as quickly as facts and circumstances allow.

Compliance Considerations

  • The DOL actively enforces these regulations, with civil and criminal claims against plan sponsors who do not deposit employee deferrals timely.
  • Late deposits must be reported on the plan’s annual Form 5500.
  • Recurring late deposits increase the risk for audit, especially if there is a pattern of delinquency.

Make sure to review your internal payroll procedures to ensure employee deferrals and loan repayments are deposited on time.