S-Corp owner-only 401(k) plan, deferral deposit deadline

[JustnERPA]

The document for a plan sponsored by an S-Corp where the only employee is the 100% shareholder states "If this plan is not subject to ERISA, the Employer shall deposit elective deferrals to the Trust as of such time as is required by the IRS and DOL."

The DOL 7-day rule does not apply to a non-ERISA plan, right? So what is the deposit deadline for any withheld deferrals?

[ETA Consulting LLC]

The whole idea, from a DOL perspective, is that amounts withheld from employee pay (due to deferrals, loan repayments, or whatever) that is to be directed to the plan becomes a plan asset at the time they are withheld.  There isn't anything in IRS rules that would seem to suggest that, but it's a moot point.  The underlying idea is that plan assets belong in the plan and amounts withheld from employee pay should be deposited to the plan's trust as soon as administratively feasible.  Not sure if that opens itself up to asking 'how much time do we have'; there's not really a hard-fast answer. 

Good Luck!

[C. B. Zeller]

Even if Title I of ERISA does not apply, the plan is still subject to IRC 4975. Since it's an S-corp, the owner's wages are reported on a W-2 and the deferrals must be withheld by the end of the year. Once they are withheld from pay they become an asset of the plan and use of plan assets by a disqualified person is a prohibited transaction (exemptions notwithstanding).

Like ETA said, there are no black-and-white rules on this, but the DOL 7-day safe harbor is probably a reasonable standard.

[JustnERPA]

Thanks, so it's a grey area: sooner is better, longer becomes questionable.

[Mike Preston]

It isn't very grey.  Maybe the teensiest of shading.

[spiritrider]

I would suggest that the lack of the DOL safe harbor is a disadvantage. It seems pretty hard to justify that this one deferral can't be reasonably segregated from the S-Corp's assets in much more than a few days.