Why is the remittance of 401(k) contributions important?
Timely 401(k) remittances are necessary for compliance with Department of Labor (DOL) regulations and helping employer contributions remain tax-deductible. Delays can lead to compliance issues and potential penalties.
When should employee 401(k) contributions and loan repayments be remitted?
- For small plan filers (typically under 100 eligible employees), the DOL provides a 7-business-day 'safe harbor' period. This means employee contributions and loan repayments should be remitted within 7 business days from the payroll date.
- For larger plans (over 100 eligible employees), the safe harbor doesn’t apply. Remittances should be made as soon as they can reasonably be segregated from company assets, often within a few days.
How can employers make timely remittances?
Employers should regularly review internal processes to make timely remittances. All team members handling payroll should be well-trained and have the necessary access to process 401(k) remittances promptly.
What is the deadline for self-employed individuals to remit 401(k) contributions?
Self-employed individuals determining their income after year-end should remit 401(k) contributions as soon as possible after finalizing their net income, but no later than their individual tax filing deadline. The contribution election should be made by the end of the year, reflecting a percentage of net income from self-employment.
When should employer matching or safe harbor contributions be remitted?
While there’s no specific remittance requirement during the year for employer matching or safe harbor contributions, remitting them every pay period allows employees to benefit from compound interest. However, plans that allocate safe harbor matching contributions every pay period are required to remit them at least quarterly.
What is the deadline for year-end employer contributions, such as true-up matches or profit-sharing?
Employer contributions for the year must be fully remitted by the company’s tax filing deadline, including any applicable extensions. Safe harbor contributions have a mandatory remittance deadline of 12 months after the end of the plan year for which they are due.
Prompt 401(k) remittances are necessary for compliance and can help maximize the benefits of retirement plans for both employers and employees.
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