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Circumventing Annual Contributions


Guest Niko
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What can I do for this situation?

I left a company before the end of a calander year that had a non-contributory profit sharing plan in place. The contribution for 1997 was less than 10% of what was expected, but cash bonuses were given out on 4/15/98.

The employer also stated to a collegue he wasn't going to make contributions because half of it would go to people who left the company, but still met the requirements to be included.

Do I have recourse?

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Within the context of ERISA, I don't think so. Since it is a profit sharing plan it most likely has a fully discretionary contribution formula. The employer is under no obligation to fund the plan from year to year.

Second, assuming that the people who left did so voluntarily, there would be no partial plan termination which would require 100% vesting for the affected participants.

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The plan is not required to be funded from yaer to year, but I guess the point in my mind is the manner the bonuses were distributed. The employer stated the bonuses were instead of the annual contribution because he felt the emplyees would prefer money in hand. The contribution to the plan was cut deliberately to spite two employees that put in considerable time and effort (8 and 4 years) to benefit the employer.

Do you think I would have a different means of recourse other than ERISA?

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My reference to ERISA was to imply that I do not have a background outside of that arena.

This doesn't fit the more popular causes of action such as wrongful termination, hostile work environment, harassment, etc. It is a case of the employer controls the purse strings and the employee controls who they want to work for. The employer sowed the seeds of discontent by slashing the profit sharing contribution and instead paying bonuses which may have been widely disparate. Some employees chose to respond with their feet.

In lieu of a breach of contract situation, wherein the employer did not fulfill a contractual obligation regarding compensation, I can't think of recourse available to the employees.

Was there a severance package that was not fulfilled?

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