Fun and Games with the DOL (late payment of deferrals)

[Guest erisafried]

Apologies if this has been asked and answered in prior posts, but I am wondering what experiences folks have had in negotiating with the DOL over corrections relating to the late remittance of elective deferrals. More specifically, how far back do you have to go to address this issue?

I am working with a small-ish company that carried over its payroll practices from a much larger company from which it spun off. Recently, the company got a love letter from DOL which led to an audit for PY2000. The audit came up clean except for DOL's favorite topic--late remittance of deferrals.

Since the spin in 1999, the company has remitted deferrals once a month, but has a bi-weekly payroll. I knew there was an issue here right off the bat, and we fixed it from 2000 forward. Now, DOL is trying to hold us up for 1999 too. I would like to tell them to go jump in the lake, but I didn't know whether they take the same sort of position the IRS does on corrections: once you/we find a problem, you have to fix all the way back, even if it's outside the statute of limitations.

We're talking about small dollars here so we may just hold our noses and pay up. Of course, if we have a decent basis for telling them to buzz off, I'd like to do so.

Anyone?

[Bird]

Sorry I don't have anything to offer about how far back they can go, but I'll share my war story in hopes you can glean some value out of it.

One of our plans was audited. They had actually always sent their deposits in weekly, at the same time as the payroll, in fact some of the deposits may have actually gone in a day before or on the same day as the payroll since the check was cut and mailed a day or two before the actual paychecks.

Well, over the course of a couple of years, 5 deposits were "late"; I don't remember the arbitrary cut-off date but it was a couple of days. The longest was 15 or maybe 17 days after the payroll date. It was a while ago and our best guess was that the diskette (they were being mailed at the time) was damaged and the investment provider had to ask for another - this definitely happened a couple of times.

We explained all this, waited several months while THEY took their sweet time to think about it, and they came back and wanted lost earnings. Fortunately, the auditor was reasonable, but the regional supervisor was a hard-a** pressing for the extra money. We explained that it would cost $X (maybe $1,000?) to calculate and allocate the lost earnings to each participant, and the actual total lost earnings were something like $65. We finally got a letter telling us that we (the client) were really bad people, guilty as heck, but they wouldn't make us deposit the lost earnings.

All I can suggest is that you estimate the earnings, estimate the cost to allocate them properly, and say that the cost would be paid by the plan. Unfortunately, it may not do you any good since there's not much reasoning with them. We were lucky to have good facts and a decent field rep.

[Demosthenes]

"All I can suggest is that you estimate the earnings, estimate the cost to allocate them properly, and say that the cost would be paid by the plan"

Don't even think about charging the plan to correct what the DOL sees as an error by the Employer!!!

The DOL can be unreasonable, obstinate, and arrogant, and that's their good side! Want to see the bad side? Try charging the Plan and Participants to correct an error the DOL found.

I think the hold your nose and pay is probably the best bet

[Bird]

Demosthenes is probably right from a practical point of view, although I'd be curious to hear opinions on whether or not it is proper to pay the (administrative) costs from the plan.

I would not be above being spiteful enough to pay FUTURE admin costs that would normally be paid by the employer, from the plan. Not that they care.

[RatherBeGolfing]

3 hours ago, Bantais said:

Consulting an ERISA attorney with experience in DOL audits would be a smart move if you haven’t already.

Since this thread is 20 years old, one can only hope that it has been resolved by now...

[Bantais]

On 10/23/2004 at 12:02 AM, Guest erisafried said:

Apologies if this has been asked and answered in prior posts, but I am wondering what experiences folks have had in negotiating with the DOL over corrections relating to the late remittance of elective deferrals. More specifically, how far back do you have to go to address this issue?

I am working with a small-ish company that carried over its payroll practices from a much larger company from which it spun off. Recently, the company got a love letter from DOL which led to an audit for PY2000. The audit came up clean except for DOL's favorite topic--late remittance of deferrals.

Since the spin in 1999, the company has remitted deferrals once a month, but has a bi-weekly payroll. I knew there was an issue here right off the bat, and we fixed it from 2000 forward. Now, DOL is trying to hold us up for 1999 too. I would like to tell them to go jump in the lake, but I didn't know whether they take the same sort of position the IRS does on corrections: once you/we find a problem, you have to fix all the way back, even if it's outside the statute of limitations.

We're talking about small dollars here so we may just hold our noses and pay up. Of course, if we have a decent basis for telling them to buzz off, I'd like to do so.

Anyone?


By the way, if you ever need a break from all this bureaucracy, I personally enjoy playing online table games to unwind — sites like jackpot.bet have some of the best online blackjack, roulette, and other table game experiences to relax after a stressful day of compliance work.

From my experience with DOL audits, they tend to be fairly strict when it comes to the timing of elective deferrals, even for small amounts. Unlike the IRS, which sometimes allows you to rely on correction programs (like the EPCRS) with certain limits, the DOL often expects plan sponsors to correct late contributions back to the date the deferrals should have been made, regardless of statute of limitations.

That said, DOL examiners will usually consider whether the amounts involved are truly de minimis and whether the plan sponsor acted in good faith once the issue was discovered. Since you already corrected the deferrals from 2000 onward and the amounts for 1999 are small, it may be possible to negotiate a resolution that limits the liability or reduces penalties. Having thorough documentation showing your intent to comply and the steps taken to correct the issue helps a lot in these discussions.

In practice, many small companies end up paying the owed contributions for the earliest period if the amounts are minor, but you can often avoid additional penalties if you demonstrate prompt corrective action and cooperation. Essentially, it’s a balance between minimizing administrative burden and satisfying the DOL that you are acting responsibly.

A good approach is to provide a clear explanation of your correction process, the relative size of the 1999 amount, and ask if they would consider this sufficient to close the issue. Often, they will be reasonable if the amounts are small and there’s a documented good-faith effort.