As our summer busy season gears up with employee benefit plans, it is a great time to provide plan administrators with a helpful hint to a very common issue we’ve encountered during our audits: timely remittance of employee contributions. During our audits, we’ve come across numerous instances where plan administrators are not in compliance with Department of Labor (DOL) rules and regulations on employee contribution remittance. We’ve come across even more questions from plan administrators asking about the acceptable timeframe for timely remittance.
According to the DOL (regulation 2510.3-102), timely remittance is defined as the earliest date that is reasonably possible to segregate the contributions from the employer’s general assets, but no later than the 15th business day of the following month. The emphasis here, though, is reasonably possible. We can more closely focus on what is reasonably possible with an example: if your company typically remits employee contributions within a day or two of the pay date, that is your established timeframe for segregating contributions and it is expected to be reasonably possible for all employee contributions to be remitted within the first few days of payroll. The DOL doesn’t consider the 15th day of the following month to be acceptable if you have established with previous remittances that it is administratively possible to remit them sooner. Failing to comply with this regulation could result in lost earnings, penalties charged to the plan sponsor and a supplemental schedule of reportable transactions attached to the 5500. A best practice would be to remit the contributions during the processing of payroll in order to avoid the DOL breathing down your neck or pursuing investigation of compliance. Plus, everyone is happier when the plan is growing and earning income faster!
*Thank you to Megan Livesay, Assurance Senior, for her contributions to this post.