Fix It Guide - Timely Deposit of Employee Elective Deferrals

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Many plan sponsors run into trouble by not timely depositing employee elective deferrals into the plan. The employer is responsible for depositing elective deferrals to the plan's trust on the earliest date that the employer can reasonably segregate the amount from the employer's general assets. IRS rules require that you make the salary deferral contributions no later than 30 days following the month in which you withheld the deferrals from the employee's salary. Many plans contain specific provisions as to when the employer has to make the deposit. If the employer fails to deposit the money by that time, the plan may become disqualified. An employer should review the plan to see if it contains a deadline for making deposits. If so, it must follow that deadline. In any case, the employer needs to coordinate with its payroll department to make sure that the deposits are made as soon as the employee's salary deferrals can be separated from the general assets of the employer.