As we start the new year, one reminder for non-profit organizations is to make sure you are remitting your employees’ contributions and loan repayments to your organization’s
403(b) or 401(k) plan on a timely basis. The Department of Labor (DOL) requires that employee contributions and loan repayments to pension plans be deposited as soon as they can be segregated but, in no case, later than the 15th business day of the month immediately following the month in which the contribution or loan repayment is either withheld or received by the employer. The DOL created a safe harbor rule under which participant contributions to small plans (those with fewer than 100 participants) will be deemed to be made in compliance with the law if those amounts are deposited within seven business days of withholding or receipt.
While the requirements for large plans mention the 15th business day of the month immediately following the month in which the contribution is withheld or received, the rule is as soon as the amounts can be segregated. Most organizations are able to segregate these amounts much earlier than the 15th business day of the following month. This typically happens when payroll is made, so amounts should be remitted the same day as payroll occurs or within one or two days after that payroll date.
If your organization is currently not remitting your contributions as timely as required, you might want to look at your process and work with your third-party administrator to change the process in order to meet these requirements in 2015.
Michelle Hatch is a partner in our Non-Profit Services Group. She oversees audit and accounting engagements for non-profit organizations, including independent schools, trade associations, health and human service organizations and art, cultural and membership organizations. Michelle is also a member of the Employee Benefit Assurance Group and oversees audits for 401(k), 403(b) and defined benefit retirement plans.