Avoid These Potential Problems!

Late Deposit of Employee Deferrals & Loan Payments. Amounts withheld from payroll by an employer must be deposited on the earliest date the employer can reasonably segregate the amount from its general assets. Contributions can reasonably be segregated.

The “safe harbor” time frame for "small" plans is seven business days. Small plans are generally plans with less than 100 participants. If the withheld amounts (employee deferrals and/or loan payments) are not deposited into the plan account within 7 business days after the pay date, they are considered to be late.

  • This must be reported on Form 5500
  • This necessitates the filing of Form 5330, Return of Excise Taxes Related to Employee Benefit Plans, along with payment of the calculated excise tax.
  • Earnings calculated to be “lost” to participants because their money was not timely deposited must be restored to the plan.

Insufficient Fidelity Bond Coverage. It is a requirement of the Employment Retirement Income Security Act of 1974 (ERISA) that qualified retirement plans subject to ERISA have a fidelity bond to cover at least 10% of the total value of plan assets (as calculated at the beginning of the plan year), with a minimum bond requirement of $1,000 and a maximum of $500,000 ($1,000,000 for a plan that holds employer stock).  This ERISA Bond can be obtained through your casualty insurance broker, and this requirement is not waived for any reason.  There cannot be a deductible associated with an ERISA bond.

In addition to the ERISA requirement, the Department of Labor (DOL) has issued regulations requiring plans which are subject to ERISA to have an annual independent audit by a Certified Public Accountant.

A small plan (one with less than 100 participants) may be exempt from this audit requirement if it meets at least one of the following exceptions:

  •  No more than 5% of the total value of plan assets are derived from “non-qualifying assets”.  A “non-qualifying asset” is any asset (other than securities of the Employer sponsoring the plan or participant loans) that is not held by a regulated financial institution such as a brokerage house bank trust department, insurance company, or mutual fund company.
  • The plan has a fidelity bond for at least 100% of the value of “non-qualifying” assets held by the plan.

It is extremely important that you maintain sufficient bond coverage for your plan.


Lane Gorman Trubitt, PLLC has a reputation for focusing on what matters – an unyielding commitment to excellent client service.

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