Employer Matching Contribution for 401K

[Guest Beth2009]

What are the consquences of an employer who fails to pay their portion of matching contributions of 3% against employee earnings? Payment was submitted for 2006, but not for 2004, 2005, 2007 or 2008. The employer never changed their election to anything other then the 3% match. They were provided the payment schedules for these missing years by the 401K sponsor after computing against the salary census. However, due to money constraints, the company never made the payments. Are they liable for this and if so, are they liable for potential earnings against these monies owed?

[K2retire]

You haven't given enough information. Is this a fixed match required by the document? Is it a discretionary match? Have they passed the ACP test each of those years? If not, were corrections done?

[Guest Beth2009]

You haven't given enough information. Is this a fixed match required by the document? Is it a discretionary match? Have they passed the ACP test each of those years? If not, were corrections done?

Yes, it is a fixed match and they did pass the ACP tests each of those years.

[K2retire]

In that case, the potential consequence of failure to follow the terms of the plan document is disqualification. It sounds like a VCP filing is in order.

[Tom Poje]

we are moving the office to a new loacation, so the books are packed away at the moment, but I also seem to recall buried in the regs if matches are deposited more than 12 months after plan year end they are tested as if they were nonelectives rather than matches (certainly its true for deferral, but I thought the same rule applied to match)

fun stuff.

Probably 2007 and 2008 can be self corrected under SCP becasue you are within the 2 year time frame, but you are asking me to recall stuff from my brain which is risky business.

[Guest Beth2009]

In that case, the potential consequence of failure to follow the terms of the plan document is disqualification. It sounds like a VCP filing is in order.

Thank you for helping. Filing a VCP is not a problem. I think the real problem is that the employees know that the company was to contribute to their 401k's and have failed to do so. It is becoming apparent that the employer has no intentions of making these contributions under the premise that the company is struggling due to the economic downturn. Do the employees have any ground to stand on to demand this money from the company?

[BG5150]

Do the employees have any ground to stand on to demand this money from the company?

If the match is a stated match (rather than discretionary) I think they do. Plus, the plan could get disqualified if the ER doesn't put in the money.