Failure To Make Contribution

[goldtpa]

I have a client who has not contributed the required top heavy contribution for 2001 or 2002. in addition the w-2 reports that the nhce contributed $4,081. However only $693 made it into the plan. the hce's w-2 shows a $6,327 contribution, however only $1,818 made it into the plan.

besides the qualification issue for failure to make the top heavy contribution, what other problems can we expect?

thanks

[mbozek]

What kind of Plan? MP, 401k or PS? Disqualification is not the worry- Lawsuit by the participant and enforcement action by the DOL are more likely if the employer did not remit the employee's contributions to the plan. What contributions was the employer delinquent in remitting for 2001 & 2. The TH minimum and the salary reduction? By the way what is the employer doing for 03? Also is the employer remitting the withholding taxes to the IRS?

[david rigby]

By phrasing of the orginal post, there appears to be exactly two participants in the plan. Correct? My hunch is that at least one more party is involved in this situation, such as payroll service and/or tpa. Not ready to use the f word yet (you know, the one with five letters that will get you put in jail), but start asking questions.

[goldtpa]

Sorry for not posting a reply sooner. I have been stamping out termites all weekend long.

This is a psp with only two participants, one HCE and one NHCE.

The owner withhheld the ee's deferrals but never submitted them to the mutual fund co. He used the money to pay bills.

The Top heavy contribution for 2001 and 2002 has yet to made made. In 2003 I have advised him to lay off the ee's dough and stop making contributions.

I told the CPA to revise the w-2s to reflect a much lower contribution for the owner.

[mbozek]

The owner has to return the employee's salary reduction to the plan along accrued interest to avoid any DOL enforcement action. The TH contributions to a PS plan are not required to be made by any specific date but the employee could make a claim for the amounts plus interest. The client may should consider terminating the plan to avoid accruing the above liabilities.