On January 14, 2010, the Department of Labor released a Final Rule that requires employers with retirement plans with fewer than 100 participants to deposit employee contributions to the plans within 7 business days upon receiving or withholding the funds.

Stated otherwise, the retirement plan withholdings need to be deposited into the plan within (and not later than) 7 business days following the pay date.

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The new Funding Requirements are effective immediately.

The new Funding Requirements will affect 401(k) and 403(b) plans that are subject to ERISA requirements only.

The new Funding Requirement will not affect non-ERISA 403(b) church plans.

Sponsors of non-ERISA retirement plans are subject to the Funding Requirements as outlined in the 403(b) regulations which took affect January 1, 2009. Such employers are required to transmit participants’ contributions to such plans “as soon as the funds were segregated from the employer’s other assets. They, however, had to deposit the funds no later than the 15th business day of the month following the month in which contributions are received or withheld by the employer”.

According to the DOL, nearly 90% of applications submitted to its Voluntary Fiduciary Correction Program involve delinquent employee contribution violations.

The new Form 5500-SF, required to be submitted by all ERISA plan sponsors on an annual basis, questions the timeliness of contributions into the retirement plan. The Form 5500-SF requires the Plan Sponsor to attest to the validity of their response with a Plan Sponsor signature.

As a Plan Sponsor to either an ERISA or non-ERISA retirement plan, your attention to these codified Funding Requirements is required.