August 2, 2025 | 3-5 Minute Read
It may not seem like a big deal for deposits to be a few days late, but the IRS and DOL take it seriously. Keep reading to see what is “late,” why it matters, and what to do if you fell behind.
How Do I Know If My Deposits Are Late?
Plan sponsors should determine the earliest date they can segregate deferrals from general assets. In practice, this really means, “as soon as possible.”
Department of Labor rules require that the employer deposit deferrals to the trust as soon as the employer can; however, in no event can the deposit be later than the 15th business day of the following month.
The rule about the 15th business day isn’t a safe harbor for depositing deferrals – it’s a maximum deadline. Plan Sponsors cannot assume contributions are timely just because they are made by the 15th.
Fortunately, if your plan has fewer than 100 participants, the Department of Labor provides a 7 business day safe harbor rule. As long as you do not exceed the threshold, your deferral deposits will be considered timely if they are made within 7 business days.
What Difference Does It Make If Deposits Are Sometimes Behind?
Failure to make deferral deposits timely may be considered both an operational mistake risking plan disqualification as well as a prohibited transaction. Late deferral contributions are a red flag during plan audits, and repeated issues can lead to the plan being classified as noncompliant, jeopardizing its tax advantaged status. Additionally, the longer it takes to correct the error, the more potential missed earnings the employer may need to pay to employees. Beyond concerns with the IRS and DOL, late deposits can weaken your employees’ trust.
What Do I Do If I Didn’t Make Deposits Timely?
Before anything else, you should reach out to your dedicated retirement analyst. They can help you determine whether deposits were late, guide you through what next steps for your specific situation, and calculate any missed earnings that need to be taken into consideration.
Deferrals with missed earnings must be deposited into participant accounts as soon as administratively feasible.
Keep a record of why the deposits were made late and review internal procedures to ensure future deposits are made in a timely manner. Be sure to have practices ensuring that in the event of any change in processes or personnel, deposits continue to be made on time.
What About Employer Contributions?
Deferrals have been discussed here at length, but employer contributions are subject to a different timeline. Employer contributions, including Matching, Profit Sharing/Non Elective, or any kind of Safe Harbor contributions, are to be made no later than the filing deadline of the employer’s income tax return, including extensions.
Employer contributions can be made at the same time as deferrals, and if they are calculated on a per period basis, it’s often easiest to deposit them together. However, as long as they are deposited by the filing deadline, they are considered timely.
Benefits² Administrators clients: If you have questions about the timing of your payroll deposits or potential corrections needed, we encourage you to reach out to your dedicated Retirement Analyst. They can help you determine if corrections are needed and what steps to take next.
To make compliance even easier, explore our Smarter Payroll Sync (https://www.benefits2llc.com/smarter-payroll-sync/) service, which automates contributions and reduces the risk of late deposits. For a more comprehensive solution, our Full 3(16) Services (https://www.benefits2llc.com/full-316-services/) include Smarter Payroll Sync along with many additional features that simplify administration and further ensure compliance.
For non-clients or plan advisors seeking guidance: Feel free to contact Leslie Wood (lwood@benefits2llc.com) for additional information and support. Leslie can provide an overview of contributions or additional strategies to ensure compliance with these guidelines.
Whether you are a current client or not, our goal at Benefits² Administrators is to ensure every plan sponsor has the knowledge and support to remain compliant and help participants succeed in saving for retirement.
MJ Lewis, QKC, QKA
MJ Lewis, QKS, QKA is a Senior Retirement Plan Consultant at Benefits² Administrators. She has more than 7 years of experience working with qualified retirement plans.