Effective January 14, 2010, the U.S. Department of Labor (DOL) finalized an ERISA regulation establishing an optional safe harbor period during which participant contributions can be remitted, without becoming “plan assets” in the interim, to employee benefit plans with fewer than 100 participants. The regulation is intended to clarify when such contributions have been timely made to the plan, which in turn relieves plan sponsors of the civil legal obligations attached to holding “plan assets” from (i) the payroll date or other date of receipt to (ii) the date of remittance to the plan. The safe harbor is part of DOL’s ongoing campaign to reduce persistent delinquencies in employee contributions to plans.

With the addition of the optional safe harbor and the commentary in the preamble to the final regulation, the participant contribution regulation (which was originally adopted in 1988 and previously amended in 1997) operates as follows: click here to view table.

The regulation was adopted substantially on the terms proposed, with only minor refinements. In response to public comments, DOL clarified that:

  • The regulation did not affect its prior guidance on the application of the ERISA trust requirement to cafeteria and certain other plans; and
  • For plans within its scope, the optional safe harbor is not the exclusive means of satisfying the general rule of the regulation.

DOL declined, however, to:

  • Lengthen the safe harbor period to more than 7 days;
  • Extend the safe harbor to larger plans, including multi-employer or multiple employer plans; or
  • Defer the effective date of the regulation (since it primarily creates an optional safe harbor).