DOL proposes regulations on when participant contributions become plan assets.

• Author: Blinka, James R.
• Position: Dept of Labor - Brief Article

Generally, Department of Labor (DOL) Regs. Section 2510.3-102 provides that plan assets include amounts that a participant pays to an employer, or amounts that an employer has withheld from wages, for plan contributions. These amounts become plan assets as of the earliest date on which such contributions can reasonably be segregated from the employer's general assets, not to exceed 90 days from the date on which such amounts are received by the employer or the date on which such amounts would otherwise have been payable to the participant in cash. Recently, the DOL has been quite concerned that employers are treating the 90-day period as a safe harbor and using the money to improve their businesses' cash flows. The DOL considers this practice improper and, therefore, has proposed to change this rule.

Under DOL Regs. Section 2510.3-102, proposed Dec. 19, 1995, an employer would have to place such monies in trust on the earliest date on which the monies can be segregated from the employer's general assets, but not later than the date on which the employer is required to make deposits of withheld income and FICA taxes. Therefore, instead of a maximum 90-day period, an employer under the proposed...