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?

Handling complex compliance audits can certainly drain your focus, and sometimes you just need a reliable way to unwind—much like discovering a seamless lineup of online games and entertainment on https://mostbet.net.in/ when you are looking for a break.

I don't think I'd assume the IRS correction rules and DOL enforcement approach are interchangeable here. The late deposit issue is really an ERISA fiduciary/prohibited transaction issue, and the DOL can certainly look beyond the period that triggered the audit if it finds an ongoing practice.

That said, I'd push back on 1999 before simply writing the check. The fact that the company was spun off and inherited the payroll practice may be relevant, particularly if you're dealing with a successor arrangement and the company had no reason at the time to understand that the inherited procedure was problematic.

I'd ask the investigator specifically what authority they're relying on for requiring correction of 1999 and whether they're treating the 1999 amounts as part of the same continuing violation. If the dollars are truly insignificant, the practical answer may still be to correct it and move on, but I'd want the DOL's position in writing before conceding the point.