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March 11, 2008

Safe Harbor for Placing Participant Contributions in Small Plans

The DOL has just issued some proposed regulations that would create a safe harbor for small pension and welfare benefit plans (those with fewer than 100 participants); specifically relating to placement of participant contributions in trust.  Generally, participant contributions to retirement plans must be placed in the plan at the earliest time possible; but, in no event, later than the 15th business day of the month, following the month in which the contribution is withheld.  For welfare benefit plans, contributions must be deposited within 90 days of withholding. 

These proposed regulations advocate depositing participant contributions, both to pension plans and welfare plans, within 7 business days following withholding.  If this safe harbor is met, the plan will be deemed to satisfy its obligation.  The DOL believes this safe harbor will, in fact, enhance plan assets by ensuring an earlier date by which participant contributions can begin accumulating interest in the plan. 

These regulations need not be relied upon until they are finalized.


The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.

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