The U.S. Department of Labor (DOL) published a final rule to protect employee contributions deposited to retirement and health plans with fewer than 100 participants by providing a safe harbor period of seven business days following receipt or withholding by employers.

The final rule, “Definition of ‘Plan Assets’—Participant Contributions,” was published in the Jan. 14, 2010, edition of the Federal Register and is effective immediately.

Prior to the new rule, employers of all sizes were required to transmit employee contributions to retirement plans, such as 401(k)-style defined contribution plans, as soon as they could reasonably be segregated from the general assets of the employer, but no later than the 15th business day of the month following the month in which contributions were received or withheld by the employer. The latest date for forwarding participant contributions to health plans was 90 days from the date on which such amounts were received or withheld by the employer.

“This rule will give employers greater clarity in remitting participant contributions to small pension and welfare plans in a timely manner,” said Phyllis C. Borzi, assistant secretary of labor for the department’s Employee Benefits Security Administration, in a statement. “We estimate participant accounts could grow by $19 [million] to $44 million as a result of these rules.”

The DOL did not expand the safe harbor to cover plans with 100 or more participants because of “a lack of information and data sufficient to evaluate current practices of such employers and assess the costs, benefits and risks to participants associated with extending the safe harbor to large plans,” according to the DOL statement.