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SERIOUS mishandling of the VCP??


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I would be interested in receiving some good advice on what to do with this eroding situation since early February of this year.  I did create an initial post on the issue and at the time, the fix was weeks away and results unknown as to how my boss would handle the entire situation.  And to true form he let me (and others) down terribly, in my opinion.  So I'm turning to the board for "expert" advice based on my telling of what I perceive to be fairly factual evidence of wrongdoings and misdeeds and he should certainly be held accountable in some way.  I have questions about the attorney's responsibilities in this as well.

I will try to be concise with what has unfolded.  We have 6 current employees affected by the lost IRA contributions as of 2/1/2020 that were "overlooked" for every current employee except one apparently.  An ERISA attorney was hired to move forward with the VCP and as of 3/25/2020, we all had our new IRA amounts deposited into our accounts, fixing the error.  My years affected were from 2013 - 2020 and others were very similar to that time frame.  However the one co-worker who has been with the company for 15 years was not given anything during the VCP for reasons we are not aware of.  The ER sat us down with a memo (attached) in hand and read from it verbatim, explaining the entire situation and what he planned to do about it.  This is the part of the memo that shines a light on the ER's intentions:  "However, if an eligible employee was given an opportunity to make an election to defer into the Plan (and chose not to do so), no corrective contribution will be due for that employee."

This individual was offered, what appeared at the time to be the SIMPLE IRA plan, by the plan representative in 2008 (the first year it was offered).  The EE turned it down due to another investment that he was provided by the ER a year or two earlier and thought this was one of the same and didn't want to contribute from his check at the time.

What has come to certainly be known as the company SIMPLE IRA plan was never again offered in any way, shape or form to this EE and also to our current employees.  This is why we all received our lost IRA for this lengthy time period, no questions asked, but this one EE was left out and he thinks it has something to do with the initial ask and decline in 2008.

Fast forward to the dust settling on the VCP and this EE drafts a 4 page letter explaining and pleading for some explanation as to why he was left out.  Silence for quite a while until ultimately the ER decides it best that he go ahead and deposit his IRA portion, 5 months after the closure of the VCP.

Just to be clear, the ER did speak briefly to the EE shortly after the closure of the VCP and everyone else had received their "fix email".  He was sorry that he couldn't do anything for the EE and he had the "document" with his signature (guessing the one from 2008 where he declined the deductions for that year).  The EE asked to see the document and any evidence proving he had been asked each year and declined each time, to which none have been provided to this date.

Now, if this isn't bad enough with the ER trying to conceal and basically steal the money from the employees over the 12 year period, he tried to do it again to the one CURRENT employee AND still has not contacted any of the FORMER employees.  I know of at least 4 former EE's that had worked for this company for 3-4 years each during this time frame (2008-2020).

How can this be?  How can both the ER and the ERISA attorney have an opportunity to fix this egregious error and make the final decision to look over the 1 EE (with no investigation or even a question as to his status) and also not contact 1 former EE about this error and appropriate steps to fix their situations?

Something is terribly wrong here or I am terribly misunderstood how a VCP is supposed to unfold or at the very least, the requirements that the ER and ERISA attorney need to meet to finalize the VCP.

Please offer advice/suggestions as to what would be the next step in holding this ER/ERISA attorney accountable?  I feel he purposely left everyone out the first time around (year after year) and when he had the opportunity to fix it (after getting caught), decided to screw some people over once again, including an EE who has been with the company since day 1 (2005).  Also as a side note, the ER has ample opportunity to reveal the company IRA plan at the time of hire for us past 4 employees but never, not once, did the EE mention the IRA to any of us during the hiring phase.

Thanks!
DR245

p.s. I'm attaching the actual MEMO, read verbatim by the ER at the company meeting on 2/25/20.  I brought the entire IRA situation to his attention on 2/1/20.

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I thought I replied to this - sometimes things go to a black hole - but maybe not, as it is complicated and as Bill Presson notes, not sure we can help.  Frankly I'm surprised your employer did as much as he did.  I'm guessing that they (attorney and ER) were taking the one employee's original election to not contribute as an ongoing election, which is valid.  But yes there is supposed to be an annual notice about the ability to contribute and what the employer would contribute so that's problematic, although there is no requirement to get a new election every year.  But he did get additional monies deposited so other than some irritation that the employee had to beg, is this such a big deal?  It boils down to 4 former employees...if I were handling it I'd certainly tell the employer he should make corrections for them as well, but, I don't know, that's a really bitter pill to swallow and I can see the reluctance to include them in the fix.  

In any event VCP stands for Voluntary Correction Program and it involves paying a fee and submitting things to the IRS.  It might be possible that they did this but I can guarantee that, given the time frame, the IRS did not grant approval for the fix; it takes...well, way longer than a couple of months for that.  I suspect they just did something that they thought was reasonable and did not submit through VCP.  

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Thanks for replying and perhaps you're right.  If the one EE has been made whole, even after having to beg and practically threaten the ER with reporting him, what's the big deal?  I can see that.  However the ER is less than honest about anything that pertains to money and this isn't the first instance of him trying to get out of paying for something legitimately but that's for another story and time.

I was not aware of the "ongoing election" portion and that the yearly check in with each employee wasn't necessarily required?  I thought the ER and/or Administrator had to meet or consult each election period and get signed election deferrals (keep the same or change election options etc..).

So then if that's not the sticking point then it does come down to the ER not giving a s&*t about the former employees who worked for him over the years and were essentially cheated out of their IRA contributions.  And I guess I would agree with you about the time-table for a VCP to be fully completed and approved given that the time frame from finding out about this whole mess (2/1/20) to the time of our deposits (3/25/20) was a rather short period of time for all that to happen appropriately and blessed by the IRS.

You mentioned "reluctance to include them in the fix.".  Is all this just guidelines etc.. that the ER and attorney should follow or not follow and if they don't, are they legally obligated to fix this properly and can/should be held accountable for the possible mishandling of the VCP?  From what I've read that's been posted on similar situations, if not handled correctly or timely, serious fines and/or criminal penalties seem to be the potential result of these types of scenarios.  And if they just "did something that they thought was reasonable" and handled it on their own, and they are found to have done that and more or less screwed it up, would there be other consequences for this ER/Attorney combo by going rogue or is that a common occurrence as well?

Again, thanks for the input and ultimately I suppose if this is bothering me enough, I'll have to make the call to simply report my reservations about the entire situation to either the DOL or the IRS or both I guess.

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17 hours ago, DR245 said:

You mentioned "reluctance to include them in the fix.".  Is all this just guidelines etc.. that the ER and attorney should follow or not follow and if they don't, are they legally obligated to fix this properly and can/should be held accountable for the possible mishandling of the VCP?  From what I've read that's been posted on similar situations, if not handled correctly or timely, serious fines and/or criminal penalties seem to be the potential result of these types of scenarios.  And if they just "did something that they thought was reasonable" and handled it on their own, and they are found to have done that and more or less screwed it up, would there be other consequences for this ER/Attorney combo by going rogue or is that a common occurrence as well?

There are three basic choices in a situation like this:  1) do nothing and hope nobody notices, 2) go to the IRS and ask for approval for a fix, or 3) try to fix it yourself and hope the IRS doesn't come knocking, or if they do, that they find your fix reasonable.  #2 costs some money upfront in fees and corrections, although from what I've heard the corrections may not be as draconian as you might think (I don't generally work in the "fixing" end of things so don't have much direct experience).  #1 is obviously the worst case scenario if caught, and #3 is where you are...yes there could be consequences to the sponsor for not correcting the failure properly, and generally the IRS is going to want a pound of flesh if you didn't come in voluntarily.  As far as the attorney's liability, I would imagine he gave the sponsor some options and the sponsor made the final decision on how to proceed so I doubt the attorney has liability unless he said "yes this fixes things perfectly" which is highly unlikely.

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