Late contributions for some participants

[Guest tonjer]

During the course of an audit, it was discovered that the elective contributions were not made for some employees. Specifically, these contributions were not made for employees that terminated employment at the end of the year and received a check for unused vacation. The amounts were withheld from the paycheck, just not deposited. Other than the prohibited transaction tax and filing the Form 5330, is there anything else that must be done? I.e. is this something that we would need to submit to VCP?

[Mike Preston]

Not enough information. How many years has this been going on? Were the administrative functions performed as if this money was deposited? Were the ADP tests done with or without this money? Does it matter? What is the relationship between the amount of monies involved to the entire plan? That is, is the failure insignificant?

[Guest tonjer]

Not certain on the number of years it has been going on. We know for certain it happened with respect to 8 participants for the plan year ending 2002. I am not certain whether the tests were performed with or without the money. The amount of monies involved in relation to the entire plan is insignificant.

[E as in ERISA]

Are you attaching a schedule of nonexempt transactions to the audit report? And reporting them on the Form 5500?

[Guest tonjer]

After thinking about this, I think that because this is a prohibited transaction, the company must (1) contribute the funds into the trust; (2) submit form 5330 and (3) pay the excise tax under Code Section 4975 with respect to those contributions that will be made late. Any thoughts?