ERISA Compliance: Employee Contributions

        ERISA Compliance: Fiduciary Responsibilities


If a plan provides for salary reductions from employees’ paychecks for contribution to the plan or participants make payments directly, such as the payment of COBRA premiums, the employer must deposit the contributions in a plan trust in a timely manner.

ERISA requires that participant contributions be deposited in the plan as soon as it is reasonably possible to segregate them from the company’s assets, but no later than 90 days from the date on which the participant contributions are withheld or received by the employer. If employers can reasonably make the deposits sooner, they need to do so. For plans with fewer than 100 participants, salary reduction contributions deposited with the plan no later than the seventh business day following withholding by the employer will be considered contributed in compliance with the law.

        Important Exceptions to ERISA’s Trust Requirement:

For participant contributions to cafeteria plans (also referred to as Section 125 plans), the DOL will not assert a violation solely because of a failure to hold participant contributions in trust.

Other contributory health plan arrangements may obtain the same trust relief if the participant contributions are used to pay insurance premiums within 90 days of receipt.

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for employee benefit plans maintained by private-sector employers. ERISA includes requirements for both retirement plans (for example, 401(k) plans) and welfare benefit plans (for example, group health plans). ERISA has been amended many times over the years, expanding the protections available to welfare benefit plan participants and beneficiaries.

ERISA includes standards of conduct for those who manage an employee benefit plan and its assets, who are called “fiduciaries.” This Legislative Brief includes a set of frequently asked questions (FAQs) to help employers understand the basic fiduciary responsibilities applicable to group health plans under ERISA.