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My question is this: No employer contributions have been made during the entire year of 2008 and only $375 of my $1800 for the calender year of 2008 was contributed that had been deducted regularly from each paycheck.

The real problem lies with the fact that my employers are under the impression that the SIMPLE-IRA account set up by them is a 'profit-sharing' program AND since they experienced a 'loss' for 2008, they are under no legal obligation to contribute to my SIMPLE-IRA account. This was not set up as a SIMPLE 401(K) account.

I have contacted representatives of PaxWorld who have told me an 'adoption agreement' was never received from my employer. This form states intent of contributions, salary reduction, and timing of salary reduction election, etc. PaxWorld however set up the account and deposited funds into my account since establishment of Oct. '06 without this form of intent. I feel I don't have any merit to claim this 'missed contribution' because this form was never submitted by my employer.

How do I recover these contributions owed and are there penalities for 'missed deferral oportunity' as written in the IRS Q&A? Is this a Labor Commissions Court case or a Small Claims case?

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  • 2 weeks later...

You might consider writing a factual letter with attachments to the IRS Employee Plans Division (your local District Office) and another to the DOL's EBSA. A letter to the employer from an ERISA attorney might also work.

Failure to timely remit elective deferrals may be a prohibited transaction (IRS and DOL penalties); both civil and criminal penalties are possible, especially with the facts you presented.

The employer is not correct. The "agreed to" employer contribution (matching or nonelective) must be made (regardless of any profit or loss). A SIMPLE IRA plan is not a profit-sharing plan.

There may also be State law consideration. Heck, your money was stolen. and agreed to contributions not made.

The plan could be disqualified (with disasterous consequences) or fixed. The IRS has procedures for fixing plans. See Revenue Procedure 2008-50, search for "SIMPLE"

Eventually, you will likely recover the amouts in limbo or recieve the agreed to contributions, probably with interest. Generally, an employer must fix all problems; not just yours.

If the employer will not make the agreed to contributions, and remit your elective contributions, all with interest; then you mut do battle.

While the trustee or custodian of your SIMPLE IRA should have a copy of the SIMPLE plan; the fact that they do not does not change the fact that a plan was likely established and must be followed.

Save all plan notices and W-2 forms, and so on. Get from other employees if possible. If all else fails, call me, maybe we can set up a conference call with employer or their plan counsel. It may help to get all of the relevent information before you go formally bonkers on them.

Hope this helps.

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Failure to remit withheld contributions is a very serious offense, basically stealing, and your employer needs to be educated to the fact that s/he does not want the Dept of Labor to get involved in this matter. Everything Gary said is right on...good luck.

Ed Snyder

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