Certified Plan Sponsor Professional (CPSP) Practice Exam

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Is it acceptable for an HR specialist to delay the deposit of employee elective deferrals past the legally permitted timeline?

Yes, if financially necessary
No, it must be deposited on time
Only under certain circumstances
Yes, with employee consent

The correct answer is: No, it must be deposited on time

The appropriateness of depositing employee elective deferrals is guided by strict regulatory requirements. According to the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Service (IRS) guidelines, all employee contributions to retirement plans must be deposited in a timely manner. This timeline is not flexible; the regulations specify that deferrals must generally be contributed to the plan no later than the 15th business day of the month following the month in which the contributions were withheld from employee paychecks. Delaying these deposits beyond the legally permitted timeline could lead to significant penalties for the plan sponsor and compromise the plan’s compliance status. Moreover, timely deposits are essential to protect employees’ retirement funds and ensure that they are properly accounted for and invested. Thus, it is imperative that HR specialists adhere to these deadlines without exception, ensuring that all contributions are deposited promptly to maintain the integrity of the retirement plan and comply with legal obligations.