EBSA ’s 2010 Priorities
Recently the DOL’s EBSA revealed its priorities for 2010 and at the top of the list is enforcement relating to the timely remittance of employee deferral contributions to defined contribution plans.
The DOL requires that employee deferral contributions and loan repayments be remitted to retirement plans on the earliest date on which they can be reasonably segregated from the company’s general assets. Failure to remit such employee contributions and loan repayments to the plan in a timely manner results in a breach of fiduciary duty and is considered to be a prohibited loan to the company. The transactions must be separately reported to the DOL and may result in the payment of lost earnings, excise taxes and penalties by the company, not the plan.
On January 14th, the EBSA issued final regulations setting forth a “safe harbor” for the remittance of employee deferral contributions and loan repayments by small plans (those with under 100 eligible participants). In order to comply with the safe harbor, these contributions and repayments must be received by the plan “not later than the 7th business day following the day on which such amount is received by the employer (in the case of amounts that a participant or beneficiary pays to an employer), or the 7th business day following the day on which such amount would otherwise have been payable to the participant in cash.”
Historically, the DOL has penalized plan sponsors for untimely remittance of employee contributions and loan repayments. However, in a speech on September 14, 2009, at the 2009 American Society of Pension
Professionals and Actuaries/DOL Speaks conference in Washington, D.C., the new head of EBSA, Assistant Secretary of Labor Phyllis Borzi, emphasized the DOL’s commitment to enforcement activities such as a “contributory plan criminal project” to prosecute violators who fail to forward employee contributions to employee benefit plans. This program is
designed “to target the most egregious and
persistent violations and to protect the
most vulnerable employee populations by
pursuing criminal prosecution of individuals
who commit crimes involving contributory
health and retirement plans.”
Examples of violations that would fall under this enforcement project include embezzlement of plan funds, including those who withhold money from worker paychecks without depositing them into the plan, and knowingly filing false Form 5500s.
Among the other priorities in 2010, the EBSA also plans to address 401(k) fee disclosure, investment advice regulations and issues regarding target-date funds used as qualified default investments.
Information courtesy:
