The Department of Labor (DOL) has been considering for some time adopting new rules for the required timing of participant deferrals. Up until now, the rule stated that employers must deposit 401k deferrals (and loan repayments) as soon as administratively feasible but no later than the 15th of the month following the month when the deferrals were withheld from salary.

Under the new regulations, effective IMMEDIATELY, employers are treated as having made a timely deposit under the plan asset rule if the contributions are deposited within seven business days after they (1) are received (if the contributions are paid to the employer) or (2) would have been paid in cash (if the contributions are withheld from wages).

Although this new rule applies only to plans with fewer than 100 participants at the beginning of the plan year, based on our experience with Plan audits of large employer Plans, we STRONGLY recommend that you follow these new guidelines as well.

The ruling includes a new subsection affirming that the seven-business-day rule is merely a safe harbor and not the exclusive means for determining whether the general deposit timing rule has been met. This means that, if in fact, you are truly unable to make the deposit in seven days, it does not necessarily mean that you have violated the rule. However, best practices suggest that you follow the safe-harbor and deposit the deferrals within seven business days.

More information can be found here:

[Definition of "Plan Assets"--Participant Contributions, DOL Reg. Sec. 2510.3-102, 75 Fed. Reg. 2068 (Jan. 14, 2010)]

Regulation: http://edocket.access.gpo.gov/2010/pdf/2010-430.pdf