Never contributed the Match

[Guest Giovanni]

The situation is that a 401(k) plan was installed in 1999 and the attorney wrote the Plan with a mandatory match (50% of 4%). He did this because the client's accountant told him to although that was not the client's intent (a misunderstanding all tha way around). Failing to read or understand the wording in the document, the consultant thought the match was discretionary. Every year, the consultant asked the client if they wanted to contribute a match....and the answer was aleays "no". The client never intended to match and has no intention to do so in the future. Now, while doing the 2004 plan year valuation, the consultant realized the true wording in the document. Any suggestions on how to handle this?

[GBurns]

The only thing that comes to mind is ... Get a loan asap.

I did not even think that it would be worthwhile to go after the consultant's E&O. This seems clearly the employer's sole fault.

[david rigby]

How about getting advice from another attorney.

[austin3515]

If we're talking about a ridiculous amount of money, I'd consider a scriveners error approach. If the Plan never gets audited, it will likely never have to be defended. IF it does get audited, the correction would likely be far worse if the IRS quashes the scriveners error, then if you corrected it now. I guess your case would be helped by another attoorney concluding that there was a scriveners error.

I guess it depends on the sponsors risk tolerance...

[GBurns]

The accountant thought and so told the attorney who also thought and so did it, then the employer signed without seeing the error, and the consultant and eveyone else through the 5 years never bothered to read and never noticed the error even while doing annual valuations and reports etc. Scrivenor's error might be a stretch but maybe another lawyer might see merit. It is worth a try. Anyhow correction now is better than a quash or disqualification later.

[austin3515]

Amen to that brother!

If it's that or bankruptcy, perhaps the answer is scriveners error...

[E as in ERISA]

What does the SPD say? Once you communicate erroneous information to participants, the IRS is less likely to buy "scrivener's error." If the only place it says there is a match is in the formal plan and everything else says that it is discretionary, then you have a better argument.