The Department of Labor’s Employee Benefit Security Administration has recently sent out a letter to some employers that caused alarm. The letter noted a particular employer had “failed to remit participant contributions and/ or loan repayments to the Plan within the time period described in Department of Labor Regulation 29 CFR 2510.3-102.” To the best of our knowledge, there have been no PCA ministries in receipt of this letter. Still we thought it best to advise you of your responsibilities to make timely employee contributions to the PCA Retirement Plan.
Simply put, an ‘employee contribution’ is the amount the employee pays into their retirement plan. This contribution amount is deducted from the employee’s salary and entrusted to the employer to send to employee’s retirement plan account. It is important to remit these contributions on a timely basis because contributions can earn money based on the employee’s investments. An employer who fails to remit on a timely basis denies their employees the chance to earn additional money for retirement. Also, employers put themselves at risk for penalties and other enforcement actions for not carrying out their fiduciary responsibilities.
Listed below are three frequently asked questions and answers you should know. The answers to these questions will assist your PCA ministry in complying with federal rules governing the remittance of employee contributions.
What defines a timely remittance of employee contributions?
We wish the IRS had a firm definition of what constitutes a timely contribution, but they do not. Their definition calls for employers to transmit contributions to 403(b) plan “within a period that is not longer than is reasonable for the proper administration of the plan.” The wisdom in this definition lies in its flexibility. It recognizes that an employer who mails a paper-based remittance will most likely have a longer transmission period than employer who processes payments online. The definition also keeps pace with technological advances. However, the rule can make it difficult to guarantee compliance.
How can a PCA Ministries comply with the law?
To comply with rules about timely retirement plan remittances, PCA ministries should aim to remit employee contributions as soon as possible after each payroll. The outer limit defined by the IRS is the 15th day of the month after contributions were withheld. This doesn’t mean the ‘15th day of the month’ limit is a safe harbor which avoids any legal or regulatory penalties. It only details the outer most limit of time for some remittances. Another significance of the ‘15th day of the month limit’ is that it provides a definition for an untimely remittance.
How do I correct untimely remittance of employee contributions?
The IRS has created a means to correct untimely remittances as well as other plan defects. This comprehensive structure is called the Employee Plans Compliance Resolution System (EPCRS) and is made up of three programs: 1. Self-Correction Program, 2. Voluntary Correction Program and 3. Audit Closing Agreement Program. To correct plan defects, an employer must select the appropriate program and follow the program rules to correct the defect.
PCA Retirement & Benefits is very familiar with the EPCRS and is willing to consult with PCA ministries on correcting plan defects, including untimely remittances. The first step in the process is to contact us. Next, plan on remitting the late contribution as soon as possible. Our retirement plan recordkeeper, for a fee, will assist you in creating a calculation that determines any gains or losses to your participant’s accounts. The fee can be nominal for small correcting small errors but can be meaningful for large protracted errors. The final step includes sending additional money to make up for lost earnings, if any.
The goal of this system is to correct your employee accounts for any losses in earnings. If you have any additional questions about remitting contributions or correcting plan defects, please reach out to PCA Retirement & Benefits at 1-800-789-8765 or benefits@genevabenefits.org. We have in-depth experience in this area and welcome the opportunity to be of assistance to you.
Geneva Benefits Group serves those who serve others, providing practical support for the financial, physical, and mental wellbeing of people who work in full-time ministry.
