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Timing of 401k Deposits

In 2010 the Department of Labor issued a final regulation to provide small plan sponsors (those with less than 100 participants at the beginning of the plan year) with clear guidance to ensure compliance with the deposit rules. Under this safe harbor, participant salary deferral deposits and loan payments will be treated as timely if deposited into the trust no later than the 7th business day following the day the amounts would have been payable to the participant.

Any late deposits are considered prohibited transactions subject to excise tax penalties and lost interest payments, and may cause the Plan to be audited.