very late deposit and DOL audit

[Jim Chad]

In September of 08 a client stepped out of the management of his company because he had an "irrevocable letter to purchase the company" from his manager. The new guy took over but did not make the agreed payment's. April of 2009, the owner fired him and took over again. The manager had never deposited the 401(k) deferrals. Business has been so bad that the new owner has never deposited the $20,000. He just received a phone call from the DOL that he is being audited the last week of November.

Does anyone have any suggestions for him?

[jpod]

He should get caught up with all late deposits.

[K2retire]

And lost earnings.

[Tom Poje]

Jim- missed you at the conference

your situation reminds me of a song...

Old Macdonald had a plan

He needs an E-I-N

And in this plan he has match

E-I E-I-N

There’s a deferral here a deferral there

Here a match, there a match

Everywhere a match match

Old Macdonald had a plan

E-I E-I-N

Old Macdonald ran a scam

I-O I-O-U

And in this scam he stole the dough

I-O I-O-U

Steal a few bucks here steal a few bucks there

Here a buck, there a buck

Everywhere a buck buck

Old Macdonald ran a scam

I-O I-O-U

Old MacDonald is in jail

D-O D-O-L

He hasn’t got a chance of bail

D-O D-O-L

Steal a few bucks here serve a little time there

Here a year there a year

The judge gave him about 20 years

Old MacDonald is in jail

D-O D-O-L

[jpod]

Under these circumstances I would not delay one minute trying to come to grips with the earnings component: get the payroll deduction amounts deposited.

[BG5150]

Great. Thanks a lot!

Now I have the "Old MacDonald" song going through my head! (quick, someone start singing the Macarena)

[K2retire]

Under these circumstances I would not delay one minute trying to come to grips with the earnings component: get the payroll deduction amounts deposited.

Since the lost earnings calculation is dependent upon the date that the deposits were actually made, I agree. But both must be done eventually.

[jpod]

Getting the payroll deduction amounts deposited before DOL finds out may help keep someone out of jail; earnings will be required to stop the PT bleeding, but that's small potatoes in the scheme of things.

[BG5150]

Don't forget to file the 5330 and pay the penalty taxes.

[Bird]

It's easy to say that "he" has to make the deposits but I take it there is no money, right? It's not clear to me if the manager ever owned the company and/or was a fiduciary. I'd want to be surer of who is at risk of going to jail before I (presumably) borrow $20,000 with no chance of recovery. Some of it may depend on whether there was an actual change of ownership or not, and even with that information, I'd want a lawyer to advise me.

[austin3515]

I just ran some quick numbers and I have determined that the odds that this is a random audit are slim to none... My guess is the DOL already knows everything you've just told us. Isn't this the number one source of audits? A participant calling the DOL to complain about no money being sent in?

Might not be a bad idea to call an ERISA attorney (on the qt of course, I woudn't defer to counsel yet!!)

Also, I've not heard many stories of the auditor actually calling to announce an audit... Maybe they wanted to hear your client's initial reaction?

[Jim Chad]

Thanks everyone. And good guesses, everyone. It was probably prompted by a call from a Participant. Maybe even from the ex - manager.

He doesn't have the money and can't borrow any more. He is almost meeting payroll now. And he is suing trying to get the exmanager to pay the deferrals that were missed.

[BG5150]

I had a client that had a "random" audit. They got a letter saying an agent would be contacting them to set up the audit and please have this, this and this ready. He gave the letter to me, we put together the required information, and sailed through the audit.

[in fact, props to us and my clients records retention, the agent said it was probably the most complete set of information he ever got without have to re-ask for stuff!]