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What recourse do employees have when their SEP contributions taken from pay is not deposited by employer?


Guest quietcook
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Guest quietcook

Have friends working for small bookkeeping business. Employer has taken the dedutions from their paychecks but all the deductions and matching employer contributions are not being deposited to the plan. They have spoken with the owner at length about this and after months all is not yet corrected. Deposits for 2003 have finally mostly been made but 2002 plus some of what has been deducted from checks in 2004 still has not been deposited to the plan.

Do these employees have any recourse available to them short of getting an attorneywhich would result in their loosing their jobs?

Thanks,

Quietcook

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SEPs and SARSEPs do not permit matching contribution. Only elective and nonelective employer contributions are permitted to be made into a SARSEP.

Is this an elective SEP (SARSEP)? Were the employee elective deferrals not timely deposited?

Please explain (more detail).

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Guest quietcook

I've been retired many years and not familiar with their plans. My friend calls it a SEP and says the employer matches up to 3% of the employees contributions. The business employees maybe 15 people, and the one's I know say that their 2003 contributions have recently been brought up to date, but that some of their own contributions plus the employers matching funds from 2002 are still not deposited, as well as much of the 2004 dollars withheld from their checks.

The employer can afford to take nice vacations overseas, and is "taking care of it" every time the employees speak with he and his wife about the missing funds. At least one of them spoke with the fund manager, but he refers them back to the business owners. All they have are their pay stubs showing the monies were withheld from their pay, and fund statements which do not show the deposits. Even if the deposits are brought up to date as the 2003 deposits were recently, they've lost out on what those funds would have earned in 2003 and 2004, just as they are with the funds which have yet to be deposited.

There's bound to be a place for them to seek assistance, whether it is the IRS or some other branch which could let them submit an inquiry and if the funds are not going to be deposited to their plans, the business should have to reimburse them for the withholdings as a minmum. How can people save for retirement when the employer is being so dishonest, especially if the employer is to suffer no consequence from the government?

Thanks,

Quietcook

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Sounds like a SIMPLE plan (maybe a SARSEP, with a 3% across the board contribution based on compensation, and not based on elective deferrals).

Either way, the Department of Labor (EBSA Division) should be notified. Never hurts to send a copy the IRS, National Office, Employee Plans Division, in Washington D.C. :ph34r: However, the employer would be a whole lot smarter :D if it availed itself of the plan correction programs offered by the IRS and DOL first(!). See primarily, Revenue Procedure 2003-44 at (link): Rev Proc 2003-44

IMO, it's never advisable to tell employer (or anyone for that matter) that letter was sent. People get fired for all sorts of reasons.

See following link: ERISA Enforcement (and address)

Generally, lost earning will be restored at a reasonable rate (unless Sponsor is able to determine actual investment results). Generally, a SEP or SIMPLE has no earning rate applicable to the plan as a whole. [see section 6.10 of above cited Rev. Proc.]

Hope this helps.

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Guest quietcook

Yes, I'm sure this will be of help to my friends. At least now, there is a direction for them to seek. Thanks for your response.

Quietcook

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