Three Different Clocks In One Regulation
The 90-day welfare plan ceiling, the 7-business-day safe harbor and the 15th-business-day pension rule are often mixed up. Here is who each one covers.
Which Limit Applies.
General information, not legal or tax advice. Check the cited sources before you act.
Participant Contribution Timing Overview
Start here for the full set of timing rules and open points.
When Payroll Deductions Become Plan Assets
The reasonably-segregable standard these limits sit on top of.
Payroll To Carrier Remittance Checklist
Set an internal deadline well inside the outer limits.
The Three Limits Side By Side.
The 90-day ceiling is in paragraph (c) of 29 CFR 2510.3-102. For an employee welfare benefit plan, the date on which contributions become plan assets can be no later than 90 days from the date the employer receives a participant payment, or 90 days from the date withheld wages would otherwise have been payable to the participant in cash. A group health plan is a welfare plan, so this is the ceiling that governs it.
The 7-business-day safe harbor is in paragraph (a)(2). It applies to a plan with fewer than 100 participants at the beginning of the plan year. A deposit made no later than the seventh business day after the employer receives the amount, or after it would otherwise have been payable in cash, is treated as made on the earliest date segregation was reasonably possible. The regulation says the safe harbor is optional and is not the only way to meet the general rule. Business day excludes Saturdays, Sundays and federal holidays.
The pension rule is in paragraph (b)(1). For an employee pension benefit plan, the date can be no later than the 15th business day of the month after the month in which the amount was received or withheld. Paragraph (b)(2) sets a separate 30-calendar-day limit for SIMPLE IRA plans. Neither applies to a group health plan. A final rule published in the Federal Register on November 25, 1997 amended the regulation’s pension plan provisions.
A Common Misunderstanding, Corrected.
It is often said that the seven-business-day safe harbor belongs only to retirement plans. The regulation text says otherwise. Paragraph (a)(2) is tied to participant count, and example (f)(3) in the regulation applies it to a self-insured contributory group health plan with 90 participants.
So a health plan with under 100 participants can use the seven-business-day safe harbor, and a larger health plan cannot rely on it. For the larger plan, the test is reasonableness, capped at 90 days. The regulation does not say what number of days is reasonable for a large plan, and we are not aware of a published figure from the Department of Labor, so we do not offer one.
Setting An Internal Deadline.
Count participants as of the first day of the plan year and write down which side of 100 you are on. Remember that the test is made at the beginning of the plan year, not on each payroll date.
Choose an internal remittance deadline that is shorter than both the carrier’s invoice due date and the limit that applies to you. A deadline you can meet every pay period beats a theoretical maximum.
Record the choice in your payroll procedures so a new payroll administrator inherits it.
Common Misreadings.
Applying the pension 15th-business-day rule to a health plan. It is written for pension plans.
Treating the safe harbor as the only route. It is optional. A deposit outside it can still satisfy the general standard, while a deposit inside it is deemed timely.
Forgetting collectively bargained plans. The regulation has transition language in paragraphs (h) and (i) for those plans. If you sponsor one, ask counsel how it applies.
Related Rules And Tools.
ERISA Part 7 Group Health Plan Requirements Checklist
A checklist of the federal rules that apply to group health plans.
Self-Funded Health Plans for 50 to 500 Employees
How funding choices change plan administration.
A Compliance Calendar for Your Plan Year
A plan-year view of the dates that matter.
Laws And Sources
29 CFR 2510.3-102: The DOL regulation on when participant contributions become plan assets, with the 90-day, 7-business-day and 15th-business-day rules.
Federal Register, November 25, 1997: DOL final rule amending 2510.3-102, with a footnote describing Technical Release 92-01.
General information, not legal or tax advice. Check the cited sources before you act.
Quick Answers.
Short replies on this page’s topic, each tied to a fuller guide.
What is the outer limit for a group health plan?
Under 29 CFR 2510.3-102(c), no later than 90 days after the employer receives the participant payment or after withheld wages would otherwise have been payable in cash. The core standard is still the earliest date segregation is reasonably possible.
Can a health plan use the seven-business-day safe harbor?
Yes, if it has fewer than 100 participants at the beginning of the plan year. The regulation ties the safe harbor to participant count and illustrates it with a self-insured group health plan.
Does the 15th-business-day rule apply to health plans?
No. That limit is in paragraph (b)(1) and covers employee pension benefit plans. Welfare plans, including group health plans, are governed by paragraph (c).
The Rest Of This Series.
When Payroll Deductions Become Plan Assets
The plan-asset definition and the reasonably-segregable standard.
Cafeteria Plans And The Trust Position
What the 1992 DOL release says and what it does not.
Fiduciary Exposure And Correction
Liability, penalties and the correction program.
Payroll To Carrier Remittance Checklist
A pay-period process that can be audited.
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