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Employee Benefits Security Administration

Fact Sheet

Amendment of Regulation Relating to Definition of Plan Assets - Participant Contributions

EBSA plans to encourage timely contributions to employee benefit plans by establishing a safe harbor period for the deposit of participant contributions by employers to their plans, ultimately supporting the Secretary's good jobs for everyone policy.

Key Action: Final Rule

The Department's EBSA plans to publish a final rule in January 2010 to amend the Department's regulation that defines when participant moneys paid to or withheld by an employer for contribution to an employee benefit plan constitute "plan assets" for purposes of title I of ERISA and the related prohibited transaction provisions of the Internal Revenue Code. The amendment will establish a safe harbor period of a specified number of business days during which the deposit of participant contributions by employers will be treated as in compliance with the requirement to make timely contributions to plans.

Key Concern and Issues to be Addressed

Based on investigations of 401(k) and similar plans, it appears that many employers, as well as their advisers, are uncertain as to when, and under what circumstances, they will be considered to have made timely contributions to their plans in accordance with the Department's regulation.

On the basis of these investigations and discussions, EBSA believes that the establishment of a safe harbor contribution period - a period during which contributions will be deemed to have been made in accordance with the regulation - will provide both enhanced security for plan participants and beneficiaries and enhanced compliance certainty to employers.

Background

Under the Department's current regulation, participant contributions must be deposited as soon as they can reasonably be segregated from the employer's general assets, but for pension plans, not later than the 15th business day following the end of the month in which the contributions are received or withheld by the employer. The latest date for forwarding participant contributions to health plans is 90 days from the date on which such amounts are received or withheld by the employer.

The Department published a proposed regulation on February 29, 2008. The proposal would establish a safe harbor rule under which participant contributions to small employee benefit plans (with fewer than 100 participants) would be deemed to be made in compliance with the law if those amounts are deposited with small plans within seven business days of withholding or receipt. The Department received 28 comment letters on the proposal. Comments on the proposal are available at www.dol.gov/ebsa/regs/commentsmain.html.

This rulemaking will encourage timely contributions to employee benefit plans and provide greater compliance certainty to employers.