Experienced auditor here, with ample 401(k) audit experience. Guess what - the DOL agrees that your employer shouldn't delay the process, OP...but seven business days is okay (although slow). In fact, timely remittances of employee withholding has long been a major focus for them. It's interesting as an auditor to see how often participant contributions are unreasonably delayed - and in some cases never make it to the individual accounts - and the participants don't even notice. Astonishes me.
The DOL's bright-line rule is here -
https://www.dol.gov/opa/media/press/ebsa/EBSA20100056.htm. As you can see, the safe harbor rule for small plans is seven business days. This means that as long as your contributions make it within that period, your employer is safe. (For large plans, there is no safe harbor provision.)
The DOL has consistently said that the "as soon as they can reasonably be segregated from the general assets of the employer" clause means that if the employer can, and usually does, remit amounts to the 401(k) provider within a certain time period (typically 3 -5 days), and then there is a pay period which is remitted outside the already-established pattern of what is reasonably possible (for example, the payroll clerk is on vacation and it takes the funds 12 business days to make it to the participant accounts), they can take enforcement action against that employer.
Tl;dr Although the reasonable period of time is somewhat less stringent for small plans, due to the safe harbor provision, if it takes more than seven business days for the remittances to appear in your account, the DOL says you have a legitimate complaint.
