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Are Your Retirement Plan Contributions Delinquent?

Roman Leshak, Jr., CPA
Roman Leshak, Jr., CPA Director, Audit & Accounting, Employee Benefit Plan Group Leader

The topic of participant contributions and their timely remittance to defined contribution plans has received increased attention over the past several years, thanks to an aggressive enforcement program implemented by the Employee Benefits Security Administration (EBSA)—the enforcement arm of the Department of Labor (DOL).

The EBSA has been investigating situations in which they believe employers may be delaying the remittance of participant contributions to the plan. Their program is intended to deter companies from using participant earnings to fund operations and to assure these contributions are remitted on a timely and consistent basis throughout the plan year.

With regard to timeliness, DOL plan asset regulation 29 CFR 2510.3-102 states that:

Amounts paid by a plan participant or beneficiary, or withheld by an employer from a participant’s wages for contribution to a plan, should be remitted on the earliest date that they can reasonably be segregated from the employer’s general assets, but in no event later than the 15th business day of the month following the month in which the participant contributions are withheld or received by the employer. 

To be clear, the 15th business day is meant to be the absolute outer limit. It is not intended to serve as a deadline.

Failure to remit participant contributions within the specified time frame may result in prohibited transactions, which need to be reported separately on the Form 5500 filing and also as a supplemental schedule to the audited financial statements. Delinquent contributions also extend to participant loan repayments, so plan administrators need to be aware of the potential impact on their plans.

The standard for timely remittances is established by the company’s history of remitting participant funds to the plan. The DOL expects plans to segregate funds at the earliest date that is administratively possible and then continue to do so on a consistent, ongoing basis. If a company is able to remit the funds to the plan in two days for a single pay period, then that becomes the benchmark to measure all subsequent contributions to determine whether they are delinquent. Larger plans with several operating locations may need to accumulate information prior to remittance. A five or six day remittance period may be considered the earliest date that is administratively possible for these companies.

Plan administrators need to understand their plan’s process surrounding participant contributions and determine whether those contributions are being segregated as soon as administratively possible from the employer’s general assets. It is a good idea to maintain a schedule throughout the year that tracks the number of days between the pay date and the actual remittance date of participant contributions to the plan. 

The remittance date is the date on which participant contributions are segregated from the company’s general assets—essentially, when the funds leave the company’s bank account. The calculation to arrive at the number of days is based on the remittance, and not the actual receipt and allocation of those funds to individual plan participants. Delays in the actual allocation of participant contributions can still be an issue, but do not fall under the delinquent contribution prohibited transaction category.

The plan administrator should also verify that the complete contribution amount is received by the plan, as files can be rejected or subsequent adjustments may result in unanticipated delays.

We have seen a significant increase in the instances of delinquent contributions among our audit engagements, and we have been working with clients to help them understand the actual application of the rules by the EBSA. If you have questions about how these rules may apply to your company’s plan, please contact us.

Roman Leshak, Jr. can be reached at Email or 215.441.4600.


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Roman Leshak, Jr., CPA

Roman Leshak, Jr., CPA

Director, Audit & Accounting, Employee Benefit Plan Group Leader

Employee Benefit Plans Specialist, Owner Operated Private Companies Specialist, Private Equity-Backed Companies Specialist

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