When to Deposit Participant Contributions and Loan Payments

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Late deposits of participant contributions and loan payments can be costly to correct and may increase the chances of a Department of Labor (DOL) audit. Late deposits are considered a “prohibited transaction” subject to excise tax and may be considered a breach of fiduciary duty. The DOL has wide latitude to impose civil penalties.

Our general recommendations:

1. For a plan with fewer than 100 eligible participants, we strongly recommend making deposits of all participants’ contributions and loan payments as soon as possible, but no later than 7 business days after each payroll date, in order to meet the “safe harbor” guidelines.

2. For a plan with 100 or more eligible participants, we strongly recommend making deposits within 3 business days after each payroll date.

Please note that employer contributions may be deposited as late as the extended due date of the employer’s income tax return.

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