non-ERISA 403(b) failure to remit EE deferrals for months

[Guest dani_o]

A non-ERISA 403(B) plan sponsor forgot to remit EE deferrals for past few months of current plan year. What are the repercussions? What will they need to do to clean it up? :confused:

[mbozek]

No penalty for late contributions However, I believe that contributions must be made by date for filing 990 in order for contributions to be counted as allocations for 2001 limitation year. See Reg 1.415-6(B).

[jpod]

State wage payment laws and similar statel law protections could create issues (e.g., interest for delayed funding of custodial accounts or annuity contracts).

[mbozek]

Late payments of benefit contributions are rarely prosecuted by st. labor authorities. May be an interest penalty but only if employees complain. Employer should make overdue contributions asap and see if there is any reaction.

[jpod]

I agree with MBozek's observation, insofar as it concerns criminal prosecutions. However, given that the plan is assumed to be non-ERISA, any civil action brought privately by participants or an enforcement action by the appropriate State agency would not be preempted by ERISA. Second, we all know that ERISA plan participants have a cause of action for such violations and the DOL is aggressively trying to enforce the "timely deposit" rule. Therefore, if there is any basis for a private civil action or an enforcement action under State law, I would think that State court judges would be very interested in making sure that employees who do not have the Federal law protections afforded by ERISA are equally protected.

[MWeddell]

If the plan sponsor has derived more than a de minimis economic benefit from the late deposit of elective deferrals, that in itself might make the plan subject to ERISA and therefore subject to the plan asset regulation's deadline. I've not seen it happen in practice, but it's at least a theoretical possibility.

[mbozek]

Having been involved in a couple of employer nonpayment of wages cases in the last year I can state that state gov. authorities are not interested in pursuing cases of back wages (no less late employee contributions )where the employer agrees to make up the back wages because they have very limited resources. As for a separate action by participants there is very little to interest an attorney if all that is available is back interest. The DOL has very limited resources to devote to chasing missing contributions in non ERISA plans for which there is no jurisdiction because they have more than enough work recovering late contributions in ERISA programs. The state of the DOL enforement programs for ERISA plans is approaching the symbolic enforcement situation of the EEOC in employment discrimination cases-- too many cases and not enough reviewers. I have not seen any cases or authority to support the claim that an employer who derives more than some vague de minimus benefit from depositing late contributions becomes an ERISA plan- that what state regulation/labor laws are for.