Safe Harbor Nonelective Contributions

[DLavigne]

We have a client who makes a SH 3% nonelective contribution after the end of the plan year and currently owes their contribution for 2008 (they filed for an extension). This employer may either dissolve or declare bankruptcy in 2009 and they've asked if such an event would exempt them from the obligation they have to fund the 2008 SH contribution. They did not terminate the plan in 2008.

My feeling is that they are still obligated to make the 2008 contribution even in their dire situation, but wondered if someone else has a different answer to that. Thanks.

[movedon]

I agree that they're on the hook.

[Guest Sieve]

I don't know where a required employer contribution to a qualified plan lies in prioroty in bankruptcy, but I would suspect that it's right up there with employee wages and would be one of the first debts paid. Otherwise, though, I suspect that employer contributions could be eliminated in bankruptcy (since ERISA does not preempt federal law).

[Guest Shrek'sconfused]

I don't know where a required employer contribution to a qualified plan lies in prioroty in bankruptcy, but I would suspect that it's right up there with employee wages and would be one of the first debts paid. Otherwise, though, I suspect that employer contributions could be eliminated in bankruptcy (since ERISA does not preempt federal law).

If there's no money in the LLC then how would the particpant receive the Safe Harbor Contribution? Would the LLC be pierced, going after the members?