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Theresa

SH 401(k) Plan where deductions have not been submitted

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Ok so we administer a SH 401(k) plan for a local dental practice.  The dentist was the sole trustee of the plan and did all the payroll information and submission of funds weekly as his employees were paid, unfortunately he recently passed and now the office staff is trying to figure out how to submit the money that was withheld in February on behalf of the employees as it has not been done and now a bigger problem has arisen in that no deductions were taken in March for any employees.  How can this be resolved?  There is a current dentist that is in the process of trying to acquire the assets of the practice.  Whew a mess for sure.

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Bring this to the attention of the executor or administrator of the decedent's estate.  It's his/her problem to fix, not yours. 

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In my world, if we're the TPA for this plan, we're taking them by the hand and walking them through all of this.  We'd be the ones who would know how to make the submissions, most likely.  If we didn't, and I'm wracking my brain to think how that would be possible, we'd figure it out.

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17 hours ago, Theresa said:

Ok so we administer a SH 401(k) plan for a local dental practice.  The dentist was the sole trustee of the plan and did all the payroll information and submission of funds weekly as his employees were paid, unfortunately he recently passed and now the office staff is trying to figure out how to submit the money that was withheld in February on behalf of the employees as it has not been done and now a bigger problem has arisen in that no deductions were taken in March for any employees.  How can this be resolved?  There is a current dentist that is in the process of trying to acquire the assets of the practice.  Whew a mess for sure.

Really it sounds like a two common problems - late contributions and a failure to withhold. These are not major problems as long as they are fixed. For the late contributions, calculate the lost earnings using VFCP. For the missed March deferrals, follow the prescribed correction methods set forth by the IRS and avoid penalties. The logistics of getting the money to the 401k or getting payroll fixed are another matter but I'm sure that can be figured out with some help from those providers. 

Step 1: Breathe

Step 2: VFCP for February

Step 3: Correct Failure to withhold deferrals for March. 

Just another day in small business 401k world, really.

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