“Timely” DOL Guidance Needed
Rev. 06/08/06, E-mail Alert 2006-11

Click here for updated information based on the Deferral Deposit Final Regs, which were issued January 14, 2010.

The DOL has promised guidance pertaining to the timely deposit of employee deferrals. And it can come none to soon! Recently, DOL agents in various parts of the country have been very strict in their interpretation of the “as soon as administratively feasible” deposit requirements.

In addition to looking at when the assets leave the employer’s control, agents are looking at when the assets are deposited in employee accounts.

An employer was recently found to be in breach of fiduciary conduct under ERISA, even though the employer had sent the custodian a check for the amount of employee deferrals via overnight delivery on the actual payday the deferrals were withheld, because the vendor/custodian who received the checks initially held the funds in a non-interest bearing account for 2 days until the allocation report was uploaded by the TPA. This caused a loss of approximately $0.65 of interest each week to the plan which had to be allocated among 125 participants (just over a quarter per year per participant). If the DOL can find this employer in breach, think about what they could find with other employers who do not send the payment on the same day they are deferred.