Do the usual timing rules apply with respect to depositing employee deferrals and loan payments?

Yes, the DOL rule requiring timely deposit of employee salary deferrals and loan payments remains in place. As long as employees continue to be paid, salary deferrals should be withheld and timely remitted. The DOL is unlikely to allow an employer to use deferrals or loan payments to bridge their cash flow shortfalls on a short-term basis because those funds belong to employees.

If employees are not paid during the period of business closure, there would be no withholding obligation for that period, because there would be no compensation for employees to defer into their retirement plan.

On April 29, 2020, the DOL in Notice 2020-01 provided relief for depositing participant contributions and loan repayments during the period beginning on March 1, 2020, and ending on the 60th day following the announced end of the COVID-19 National Emergency. Special conditions apply to rely on this relief:

  • a failure to deposit timely must be attributed solely to the COVID-19 outbreak;
  • plan fiduciary and/or service provider’s actions are reasonable, prudent, and in the interest of the employees;
  • amounts withheld from employees’ pay are deposited as soon as administratively practicable under the circumstances.

Cetera Retirement Plan Specialists is a third-party administrator and may not offer tax, legal or investment advice. Plan sponsors should consult their own tax, legal or investment professionals.