Use of Checking Account to Accumulate Deferrals (Posted October 15, 2001) Technical Tip 22: The following question and answer are from the DOL Q&A Session at the 2000 ASPPA Annual Conference: Can the employer open a checking account for the trust and make weekly deposits of deferrals to this non-interest bearing account, and then monthly send a check to the mutual funds to be invested as per the participants' directions? DOL Response: The deposit of 401(k) deferrals into a bank account established in the name of the trust for the plan will satisfy the requirement under the plan asset regulations to deposit the employee contributions into trust. At this point, the situation presented in the question raises issues of prudence under ERISA Section 404. Relevant factors will include how long the assets are held in a non-interest bearing account and why a non-interest bearing account has been chosen in the first place. For Section 404(c) purposes, the situation presents a question as to whether the plan participants have actual control over the investment of the assets while they are held in the bank account as well as the fact that, during the period of time the assets are in the bank account, they are not being invested in accordance with the participant investment directions. Caveat: The answer was drafted by Fred Reish and Brad Huss, the program moderators, based on their understandings of discussions with four senior officials of the Pension and Welfare Benefits Administration (PWBA) of the U.S. DOL. As a result, it does not represent a formal or binding position statement by the PWBA. View all Tips © 2012 Reish Luftman Reicher & Cohen, a Professional Corporation Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation.