When is a 401(k) deposit legally late? The rule sponsors misread
Payroll ran on a Friday. The deferrals reached the plan’s trust three weeks later. Whether that deposit was late is not a judgment call, and it is not answered by the two numbers most sponsors have heard: “15 business days” and “7 business days”. Both numbers are real, both come from the same regulation, and both are routinely read to mean something they do not say.
The regulation is 29 CFR 2510.3-102, and the whole question turns on one date: the day withheld contributions stop being the employer’s money and become plan assets.
The actual deadline: as soon as you can, not a fixed number of days
The general rule, 29 CFR 2510.3-102(a)(1), read on the eCFR (current through 2026-08-24):
“the assets of the plan include amounts (other than union dues) that a participant or beneficiary pays to an employer, or amounts that a participant has withheld from his wages by an employer, for contribution or repayment of a participant loan to the plan, as of the earliest date on which such contributions or repayments can reasonably be segregated from the employer's general assets.”
There is no fixed day count in that sentence. The deadline is the earliest date the money could reasonably have been segregated, and that date is set by your own payroll operation. An employer that has ever remitted in three business days has demonstrated that three business days is reasonably possible for it. That is why the same calendar gap can be timely for one employer and late for another.
The 15th business day is a ceiling, not a grace period
The number most often quoted as “the deadline” comes from paragraph (b)(1) of the same section, and it says the opposite of what it is quoted for:
“in no event shall the date determined pursuant to paragraph (a)(1) of this section occur later than the 15th business day of the month following the month in which the participant contribution or participant loan repayment amounts are received by the employer”
That is an outer limit on the (a)(1) date, not a substitute for it. A deposit inside the 15th business day of the following month can still be late if the money could reasonably have been segregated earlier, which for a payroll run through any modern provider it almost always could. Treating (b)(1) as a grace period is the single most common way a sponsor talks itself into answering “No” on a question whose true answer is “Yes”.
The 7-business-day safe harbor exists, and most plans reading this do not qualify
Paragraph (a)(2)(i) does create a real safe harbor, deposits deemed timely with no facts-and-circumstances argument. Read the opening condition:
“in the case of a plan with fewer than 100 participants at the beginning of the plan year, any amount deposited with such plan not later than the 7th business day following the day on which such amount is received by the employer”
Fewer than 100 participants. A plan large enough to file a Schedule H, which starts at 100 participants, has no deemed-timely harbor at all. For large plans the standard is only ever the (a)(1) earliest-segregation date, measured against the employer’s own demonstrated capability.
One definition worth having exactly, because weekends and federal holidays change the count. Paragraph (e):
“the term business day means any day other than a Saturday, Sunday or any day designated as a holiday by the Federal Government.”
What turns on that date
The segregation date is not bookkeeping trivia. The moment withheld amounts become plan assets, an employer still holding them is holding plan assets in its own accounts. The 2024 Form 5500 instructions (Schedule H, line 4a) draw the consequence directly:
“An employer holding these assets after that date commingled with its general assets will have engaged in a prohibited use of plan assets (see ERISA section 406).”
The same instruction routes the tax side to IRS Form 5330, the return on which the section 4975 excise tax on prohibited transactions is reported. And the failure is disclosed on the plan’s own Form 5500: Schedule H line 4a, answered “Yes” with the aggregate late amount, year after year until the year after the failure is fully corrected. Those filings are public. Whether your plan’s filings already report this, three years running, is checkable by EIN at planremit.com/check.
What this rule cannot tell you from the outside
Two honest limits. First, the (a)(1) date is facts-and-circumstances: it depends on payroll cadence, provider, and history that no outside reader of a filing can see, so no one can compute your exact lateness from public data. Second, this page covers the pension-plan timing rule only. The same section carries a different outer limit for welfare plans (90 days, paragraph (c)) and a SIMPLE IRA rule (30 calendar days, paragraph (b)(2)), which are different questions for different pages.
Sources
29 CFR 2510.3-102, read on the eCFR 2026-08-25, text current through 2026-08-24. 2024 Instructions for Form 5500, Schedule H line 4a instructions (DOL/IRS/PBGC), read 2026-08-25. Quotes are verbatim from those texts.
Published by Neige AI, Inc., last reviewed August 25, 2026. See the method and sources.
This is independent research, not legal or tax advice. It quotes primary sources with citations. Verify anything load-bearing against the primary source itself before acting on it.