Employer's failure to make contributions to SIMPLE IRA Plan

[Guest nafsbuc]

I am new to this area, so please excuse me if the questions I have below have been answered in other threads, but here is the situation I have. A client is a C corporation with a fiscal year ending June 30th. It established a SIMPLE IRA Plan several years ago and made proper matching contributions and proper employee withholding contributions through July of 2008. Beginning in August of 2008, neither the amount withheld from employees' gross compensation nor the corporation's matching contributions were transferred to the Plan. The employer has the fiscal means to make these contributions at the present time. In accordance with Rev. Procedure 2008-50, is this the type of situation that is correctible under SCP or VCP? If so, which one? I would think VCP given that it affects all of their employees, but I am looking for the opinions of others. Is this the type of situation that is not correctible under the EPCRS program because it is considered a failure relating to the diversion or misuse of plan assets?

If it is correctible, how should the employer go about correcting it? Is a separate correction required under Dept. of Labor rules? Finally, does the employer need to amend any tax returns?

Like I said, I'm new to this area, so please excuse my ignorance. All help would be appreciated. Thanks.

[Kevin C]

I would start by reviewing the DOL's Voluntary Fiduciary Correction Program. Their website says Simple IRA's covering employees are eligible. There is information there about the VFCP Class Exemption.

http://www.dol.gov/ebsa/compliance_assistance.html#section8

[Guest nafsbuc]

Thanks, Kevin. Is the DOL correction program necessary in light of the EPCRS correction program under Revenue Procedure 2008-50? Thanks again for your help.

[Kevin C]

Did you find anything in Rev. Proc. 2008-50 that says you can correct late deposits of amounts withheld from paychecks under EPCRS? The following sections indicate to me you can't:

Section 4.12 Diversion or misuse of plan assets. SCP, VCP, and Audit CAP are not available to correct failures relating to the diversion or misuse of plan assets.

Section 6.09 Matters subject to excise taxes or other penalties. (1) Except as provided in this revenue procedure, the correction programs are not available for events for which the Code provides tax consequences other than plan disqualification (such as the imposition of an excise tax or additional income tax). For example, funding deficiencies (failures to make the required contributions to a plan subject to § 412), prohibited transactions, and failures to file the Form 5500 series cannot be corrected under this revenue procedure.

The 2008 employer matching contributions should fall under EPCRS, IF they are late. What was the due date for the matching contributions? You are still in the time period where SCP is available for significant operational failures.