employer mistakes/mixups

[lexi]

Pls advise re the follwoing two scenarios:

1) An ER, because of a computer coding error, has been making contributions for a CBA EE into the wrong plan. CBA EE should be in a money pension plan and instead, contributions are being made for him to company's other 401(k) plan. How do we get the money to him in the plan he should have been in to begin with?

2) ER has miscalculated the amount it should have been deferring on 18 of its EEs' behalf for the past 6 months (e.g., ER should have been contributing 2% of EEs' wages but instead has contributed only 1.5%). Is there a way to fix this w/o asking the ER to cough up the amount owing in a lump sum (e.g., could we increase ER contributions to the plan for the next 8 payperiods of the year?)

does anyone have any thoughts? Thanks in advance.

[Jim Chad]

The first one seems easy. This seems to be a mistake you would correct by transfering the funds plus gain/loss to the Money Purchase Pension. Just make sure the money is never in the account of the employer in the transfer process, not even for a minute.

As for the second question: I believe the conservative answer is for the Employer to make up the missed payments. I am quite sure this is the correct answer if we were in the next tax year. But it seems to me, that since you are in the same tax year you could increase the EE deferrals for the next 8 pays so they have a deferral of 2% for the year.

I am looking forward to hearing other opinions on this.

[Bird]

I agree with Jim Chad on the first one.

The phrasing of the second question confuses me; I think Jim read it as the employee deferrals weren't taken out of their pay, and if that's the case, then I agree that I would make it up over the last few pay periods, with their approval. But I'm wondering if we aren't talking about some kind of an employER contribution...

ER has miscalculated the amount it should have been deferring on 18 of its EEs' behalf for the past 6 months (e.g., ER should have been contributing 2% of EEs' wages but instead has contributed only 1.5%

An employER doesn't defer; the second part makes me think these are employer matching or profit sharing contributions. If that's the case, it's simple - just make them up (by the time of filing the tax return if you want to deduct them in this year). Oh, I suppose if they are matching contributions and you are matching on a payroll basis then you have issues with the need to get them in by a certain date; shortly after end of the quarter or something...I don't know those rules off the top of my head but let's clarify the question first.

[Archimage]

If it is deferrals, I would recommend using the prescribed method from the IRS in the EPCRS. Make a 50% QNEC for the ADP for the time period in error. (See Rev. Proc. 2006-27

[lexi]

yes, you guys are right: it is an employER matching contribution issue. The ER should have been matching w/ a 2% contribution and instead, has been undermatching (by .5%) for the past six months. We need to make it up and the ER prefers doing it over a couple fo payrolls.

does anyone disagree w/ that?

[Bird]

If the matches are calc'd on an annual basis and you do true-ups at the end of the year, then it doesn't matter too much when the money goes in so over the next few payrolls is fine.

If the plan says matches are done a payroll basis, i.e. no annual calcs and true-ups, then there are deposit requirements that I don't know off the top of my head but I think you didn't comply. But for the amount of money involved, I think I'd just put it in over the next few payrolls and not worry too much about it.

[lexi]

do you guys know of any good resources out there that gives answers to highly technical compliance questions? i haven't found any good resources out there when it comes to trying to figure out how to correct a plan mistake.

what do y'all think?

[SteveH]

I use the benefitslink.com message boards.

[Guest Noodle]

TAGData.com has been good to me.

- Noodle

[Jim Chad]

The ERISA OUTLINE By Sal Tripoodi is around $400 for each edition. I buy it every other year and think it is well worth it. I think you can order it off of the ASPPA website.

I have also heard a lot of good about Corbel's Pension library.