Safe Harbor

[Earl]

If a plan is properly Safe Harbor in 2008 and goes out of business in 2009 before the SH is funded where does the liability go?

Stays with owners? Officers?

Any idea on where to find any regs on this eventuality?

Thank you

[K2retire]

I am not an attorney, so I can't give legal advice. If the employer is a corporation, the owners are specifically exempted from personal liability by statute unless some exception can be found. It the employer is a sole proprietor, he or she is personally liable. Other business structures vary.

[Kevin C]

A related question is what happens to the plan if the safe harbor contribution is not made timely? In addition to losing the SH for 2008, I would think failing to deposit a contribution required by the terms of the plan would be an operational failure that would jeopardize the qualified status of the plan. If the owners are planning on rolling their distributions to an IRA, they will have some incentive to keep the plan qualified.

You need an ERISA attorney.

[Earl]

Thanks, but my Safe Harbor is fine.

This client needs help, though, I'll grant you that.

Have you had any experience with IRS trying to contact companies out of business and no mail forwarding? I have seen the process start a couple times for companies that I know I have the only usable records. I never heard anything...as if the IRS just gave up.

Seem likely?

[Kevin C]

If they don't fund the 2008 Safe Harbor contribution, your Safe Harbor is not "fine". See 1.401(k)-3(h)(1).

I haven't had any experience with the IRS along those lines. But, I have with the DOL. I was contacted a few years back by DOL about a client we fired several years before that. The current Director and Board of the company told DOL they had no plan records and their plan was gone. The Director when we fired them filed a DOL complaint because they wouldn't pay her benefit after her employment terminated. The DOL made sure everyone got paid what they were entitled to receive, then fined both the current and former Directors.

[Earl]

Sorry that was supposed to be a joke. The client needs an attorney, not me.

OK?