Employee Contribution Deposits & Summary Annual Reports

Employee Contribution Deposits

Many employers withhold employee contributions from the employee’s payroll check and remit the total contribution for all employees to their retirement plan.  DOL Regulation 2510.3-102  requires employers to remit the employee contributions to the plan as soon as they can be reasonably segregated from the employer’s general assets, but no later than “the 15th business day of the month following the month in which the participant contributions are withheld or received by the employer.”  The regulation continues to be an area of concern of the Employee Benefits Security Administration (EBSA).

EBSA officials continue to stress that employee contributions are due to the plan “as soon as they can be reasonably segregated” from the employer’s general assets.  The 15-day rule is not a safe harbor.  In other words, plan sponsors should not assume contributions are in compliance with the regulations so long as they are remitted prior to the 15-day limit.  The defining characteristic is the earliest date on which contributions can reasonably be segregated from the employer’s general assets.

In a recent question and answer session with Plan auditors, EBSA officials suggested auditors compare the timeliness of the employer’s remittance of participant contributions to the plan to the timeliness of the employer’s remittance of FICA and FIT withholdings to appropriate sources.  If the sponsor can remit payroll taxes within a few days of payroll, it follows that it can remit the employee contributions to the plan in the same timeframe.

Summary Annual Reports

The summary annual report (SAR) is a narrative summary of the principal information contained in the financial statements of the Form 5500.  The SAR must be furnished to participants and beneficiaries within nine months after the close of the plan year [DOL Reg.2520.104b-10(c)].  Also, if Form 5500 is extended, the deadline for furnishing the SAR is two months after the form’s extended due date.  For example, if the filing due date for the Form 5500 of a calendar-year plan has been extended to October 15, the SAR must be furnished to participants and beneficiaries on or before December 15.

SARs must be provided to all participants and beneficiaries receiving benefits under a plan. Terminated employees are still considered participants as long as they have an account in the plan.  For SAR purposes, DOL regulations also include in the definition of a participant or beneficiary: a participant or beneficiary under ERISA; an alternate payee under a qualified domestic relations order or prospective alternate payee; or a representative of any of these.

DOL regulations provide a fill-in-the-blank format for the SAR for retirement and welfare plans.  The blanks are filled in with information taken from the most recent Form 5500.  Sponsors cannot change the format of the SAR.  They must use the format as provided in the regulations.

Professional administrators will generally provide the sponsor with the completed SAR in a timely manner.  It is the responsibility of the plan sponsor to distribute the SAR to each participant or beneficiary receiving benefits under the plan.