401K Deferrals & 7 Day Safe Harbor

[ERISA13]

For small plans, are salary deferrals considered timely deposited as long as they are deposited to the plan within the 7 day safe harbor deadline or do the deferrals have to be allocated to the participants by the deadline? For example, for an employer who has weekly payrolls, would they be in compliance by depositing the employee deferrals into a pooled plan account each week and then allocating the deferral amounts to participants monthly, quarterly, etc.?

[Bird]

I think yes, for purposes of the "late deposit" rules which are focused on employers not holding onto the money for too long.

You might have other issues about complying with self-direction, or maybe not.

[GMK]

I think Bird nailed it.

I'd get an OK from my ERISA counsel before doing this:

depositing the employee deferrals into a pooled plan account each week and then allocating the deferral amounts to participants monthly, quarterly, etc.

unless my approved Plan Doc and SPD already spell this out. Maybe it's OK, but I'd check.

[Lou S.]

From a deposit timimg issue you are fine. You need to get into the trust, not necessarying particiant accounts.

The money is trutee directed though until you allocate it to particpant accounts so you may or may not have a fiduciary issue depending on how long the money sits and whether or not you allocate earnings on it while it sits. Presumable it is in money market making virtually zero these days.