Trust Updates Archive
(January 14, 2010 --Chicago, IL) -- Small employers have seven (7) business days to deposit pension plan contributions to plans, according to the U.S. Department of Labor's final rule on plan contributions to be released today. Trustees are the on the hook for ensuring timely collection unless plan documents have been amended.
Currently, employers of all sizes must transmit employee pension plan contributions "as soon as they can reasonably be segregated" from the general assets of the employer. That said, they cannot be deposited later than on the 15th business day of the month following the month in which contributions are received or withheld by the employer. Health and welfare plans have up to 90 days to forward participant contributions after they are received or withheld by the employer.
The DOL's position is that small employers can usually segregate assets faster than large employers. Based on its studies, the agency has determined 90 percent of small plans currently receive "at least some participant contributions within 7 business days after withholding." This leads regulators to conclude that a 7-business day deposit rule is achievable and will be more beneficial to plan participants.
According to Phyllis C. Borzi, Assistant Secretary of Labor, Employee Benefits Security Administration, as a result of more timely contributions, aggregate participants earnings could grow by $19 million to $44 million.
Industry sources counter that the rule will drive up small employer administrative costs. They say small employers are not a homogenous group especially regarding their payroll systems.
Trustees are responsibility for timely collection of participant contributions, according to the DOL, unless plan documents or the trust agreement limit their duties. Legal sources say that trustees, especially co-trustees, should double check plan documents and trust agreements to ensure that duties related to "control and management of plan assets" specifically address plan contributions.
For more information see the upcoming issue of Trust Regulatory News.
No statement in this issue is offered as or should be construed as legal opinion or advice or as an indicator of future performance.
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