Many employee benefit plan sponsors have faced logistical challenges during the pandemic, such as office closures and remote work environments, which have made it difficult to remit participant 401(k) contribution deposits on time. In response to these challenges, the Department of Labor (DOL)'s Employee Benefit Security Administration (EBSA) has issued Disaster Relief Notice (2020-01), which provides flexibility and relief to sponsors struggling with remittance delays due to the pandemic.
Late Participant Remittances
Under normal circumstances, plan sponsors are obligated to ensure that participant 401(k) contributions (including participant loan repayments) are deposited into participant accounts as soon as reasonably possible, but no later than the 15th business day of the following month.
Under the relief measures, the DOL has stated that it will not take enforcement action against plan sponsors who were delayed with their participant 401(k) contribution deposits from March 1, 2020, until the 60th day following the announced end of the National Emergency resulting from the COVID-19 pandemic.
For delays caused by the pandemic that have been properly documented, the DOL does not require plan sponsors to report those remittances as late nor calculate lost earnings on those remittances.
Disaster Relief Eligibility
To qualify for the disaster relief, late deposits must be attributed directly to the pandemic. The plan sponsor must document the cause of the delay, including specific dates and other details.
As the work environment continues to change, a best practice is to document each event as it occurs, rather than waiting until auditors or DOL officials request the information. Creating a detailed remittance history from March 1, 2020 onward can be a helpful way for plan sponsors to document any delays related to COVID-19. Service providers for the plan may also be able to assist in the documentation of late remittances, by providing reports on transactions, account balances, reconciliation issues, and other details.
If you have questions about how to properly document your late remittances, leave a comment below, or feel free to reach out to me directly, I’m happy to help!