The due dates for depositing employee 401(k) deferrals differ depending on whether the plan is classified as small or large under Department of Labor (DOL) rules.

Small Plan vs. Large Plan

The distinction is based on the number of eligible participants at the beginning of the plan year:

• Small Plan: Fewer than 100 participants
• Large Plan: 100 or more participants

Deposit Timing Requirements

Small Plans (fewer than 100 participants)

• The DOL provides a safe harbor: If employee deferrals are deposited within 7 business days after being withheld from wages, the deposit is considered timely.
• If deferrals are deposited after 7 business days, the plan sponsor must prove that the delay was reasonable.

Large Plans (100+ participants)

• No fixed safe harbor.
• Deferrals must be deposited as soon as they can reasonably be segregated from the employer’s general assets, but no later than the 15th business day of the following month.
  • Note: The 15-day rule is not a safe harbor; it’s a maximum limit, not a standard.
  • The DOL expects most large employers to deposit deferrals within a few business days, often as soon as 1–3 days.

Penalties for Late Deposits

Late deposits are considered prohibited transactions and:

• Require Form 5330 to report excise taxes.
• May require correction under the DOL's Voluntary Fiduciary Correction Program (VFCP).