Late Deposits of Employee Deferrals and Loan Repayments
On April 14, 2026, the U.S. Department of Labor (DOL) issued Field Assistance Bulletin No. 2026-01 (FAB), which outlines the Employee Benefits Security Administration’s (EBSA) enforcement priorities and guiding principles as they relate to the U.S. employee benefits system. Per the FAB, EBSA remains committed to protecting benefits for plan participants and beneficiaries through the enforcement of the Employee Retirement Income Security Act of 1974 (ERISA). While there is a significant focus on investigations involving “egregious conduct and significant harm,” there continues to be a priority on less complicated issues, including delinquent participant contributions.
In fact, the FAB establishes an expedited timeline for this issue, signaling increased enforcement, particularly for those that are self-reported on Form 5500. Industry experts report that DOL investigators are actively using these Form 5500 self-disclosures to target plans for their audits. Because late deposits constitute a nonexempt prohibited transaction under ERISA, reporting them on the form makes the plan an easy candidate for EBSA’s streamlined 18-month audit pipeline.
To this end, there also appears to have been an increase in the number of emails and/or letters from the DOL to plan sponsors/administrators who have reported late deposits. The correspondence typically contains a reminder that the DOL offers a program called the Voluntary Fiduciary Correction Program (VFCP) for correcting this type of failure.
The Importance of Timely Deposits
Employee deferrals (pre-tax and Roth) and participant loan repayments are employee funds, not employer funds. Therefore, if an employer holds the funds longer than necessary, it is treated by the DOL and the Internal Revenue Service (IRS) as a loan from the plan to the employer, which is a prohibited transaction. Essentially, the employer is holding onto the employees’ funds or “borrowing” the amounts from the employees. This prohibited transaction violates both ERISA and the Internal Revenue Code (IRC).
What Constitutes a “Timely” Deposit?
The DOL requires that an employer remit participant contributions and loan repayments to a 401(k) plan on the earliest date on which such amounts can reasonably be segregated from the employer’s general assets, but in no event later than the 15th business day of the month following the month in which the amounts were paid to or withheld by the employer. For most employers, that means no more than two or three business days after the payroll date. However, if the employer has a written procedure that states all deposits are to occur on the same day as payroll, and a given deposit gets sent to the plan in, say, two days instead, the DOL could consider that deposit to be late, as it violates the standard employer protocol. Plans with fewer than 100 participants are permitted seven business days to complete the transaction, but large plans with 100 or more participants are held to the “as soon as reasonably possible” standard.
An important note: 15 days is not the rule that the DOL adheres to. This is only an outer limit, not an acceptable standard. The DOL will look at all deposits made for the plan year and, absent unusual circumstances, will generally take the position that the quickest remittance is what is required for all remittances.
How to Correct a Late Deposit
Most importantly, if a late deposit has not already been put into the plan, do so as soon as possible. Lost earnings for each affected participant are also required to be calculated and paid into the plan. If utilizing the DOL’s Voluntary Fiduciary Correction Program (VFCP), there is an online earnings calculator that may be used. If the Plan Administrator prefers to self-correct the late deposit, it should use the earnings method outlined in the IRS’s correction program, the Employee Plans Compliance Resolution System (EPCRS).
What to Do if You Get an Email or Letter from the DOL
Do not ignore an email or letter from a local DOL office informing the plan administrator of the availability of the VFCP. VFCP is a voluntary program that allows employers to correct several types of prohibited transactions and was updated in 2025 to provide for a self-correction component for late deposits of employee deferrals and loan repayments.
However, even though it does not include a user fee, the VFCP is not an easy tool. It requires a lengthy application, along with proof of the correction of each late deposit (payroll, bank account, and trust). Further, the DOL does not guarantee that using the program will not trigger a full-blown investigation. Given this, plan sponsors and administrators should discuss with their Third-Party Administrators (TPAs) what method to use.
Conclusion
Plan sponsors and administrators should consider the FAB and make sure they have documented procedures in place for depositing employee deferrals and loan repayments. If a filed Form 5500 reports late deposits, assume that may be a potential DOL examination target. Finally, if one has received correspondence from the DOL, contact a TPA or legal counsel as soon as possible.
Please contact us if you have questions about the information outlined above; our seasoned and experienced employee benefit plan professionals are here to help. You can also learn more on our Employee Benefit Plan services page.
About the Author
Steph Kramer is a Manager in the firm’s Audit & Assurance Segment. Steph audits a broad spectrum of employee benefit plans, including 401(k), 403(b), retirement, profit sharing, health and welfare, and VEBA plans.… Read more
