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Verbal Communication of Employer Match


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In December of 2015, the CEO of a plan sponsor told employees in a conference call that for 2016 the company would begin matching on a monthly basis and discontinue matching on an annual basis. The CEO also communicated what the match formula would be for the year.

As part of this change the plan doc was amended to allocate matching on a payroll by payroll basis. The plan doc has the match as discretionary. The plan doc also states that all employer contributions must be deposited by the IRS tax deadline plus extensions.

For the first 3 months of 2016 the match was allocated per payroll but remitted to recordkeeper monthly. But then the company began submitting employer contributions 2-3 months after the payrolls for which they were allocated. It seems remitting ER contributions 2-3 months after the payrolls may not violate the timing requirement established by the plan doc. However, could the CEO's verbal communication of a "monthly match" supersede the plan doc and obligate them to remit ER match monthly?

Thanks for any thoughts.

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You'd have to provide a transcript of the entire announcement in order to evaluate this. However, my guess is that he did not make any particular promises concerning the timing of deposits, but was merely announcing a monthly match calculation, as opposed to an annual calculation.

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Looks like someone is really cranky.

A CEO who regularly makes false promises ends up with a company full of disgruntled employees. However, the transcript of the CEO's comments is irrelevant to the operation of the plan unless they have really bizarre document wording that makes verbal comments of the CEO part of the plan document. 

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Cranky?  Not me.  Evidently the document addresses the timing of deposits only by establishing a deadline, which is what one would suspect, and presumably it leaves it to the employer to determine when contributions will be deposited within that deadline.  If the CEO said contributions will be deposited monthly, he should be advised that if the company does not comply it would not be a slam dunk to defend the slower deposits in court.   

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In the beginning, God created the heavens and the earth... Oh, my apologies; that is for bible study.

Plans must be operated pursuant to their 'written documents'. That's Section 401(a)(1) of the Internal Revenue Code; which is like Chapter 1, Verse 1 of everything we know.

I cannot even fathom a situation where verbal communication would supersede the written language in the plan. I think that was Kevin C's point.

Documents are, generally, written to address the time frame for the calculation while leaving the deposit timing open.  For instance, a match this is calculated using compensation and deferrals during a payroll period is just that; a calculation that is performed for a certain time frame.  It says nothing about the deposit timing; or that you have until the tax filing deadline for a deduction. 

Now, if it is a Safe Harbor Match, then there are some deposit timing issues for the match that is done more frequently than the plan year.  (like end of the following quarter).

I say this to reemphasize what many of us have been saying for the longest.... RTFD. I'm not saying it with any emotion, but it's just that the answers are there over 99% of the time.  Now, there are instances where language in the plan may be tricky (e.g. timing of calculation vs. timing of deposits), but we can work through that.  We must first agree, however, that only one thing trumps the plan document; and that's the Treasury Regulations; not the spoken words of an owner.


Good Luck!

CPC, QPA, QKA, TGPC, ERPA

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