401k salary deferrals not deposited at all - employer now has no money

[Guest JBarn]

I knew it had to happen eventually; I'm dealing with my first case where the Employer withheld deferrals and did not deposit them-period. No grey area,he admits he didn't do it, and does not have the money. QUESTION: Who is liable for money? Obviously the Owners,but does liability extend to non-owner Trustees? How about employee responsible for bookkeeping? Anyone else? Any cites would help. Thanks for any info.

[IRC401]

If I understand your facts, you have a very serious situation that may involve criminal activity. I recommend that you get legal advice ASAP.

[Guest msearle]

The Plan Administrator had fiduciary responsibilities under ERISA. You can sick the Department of Labor on them. (DOL is the agency that oversees ERISA) Good luck

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[david rigby]

there have also been other discussion threads on this topic. try searching the Message Boards for more help.

[Guest PTE]

For an old case on criminal liability look at U.S. v. Grizzle out of the 11th Circuit. (I don't remember the cite).

For personal liability purposes, the contributions became plan assets on the 15th business day after the month in which they would otherwise been payable to the employee (if not sooner). After this date anyone with "discretionary control" over the assets would be a fiduciary and personally liable. I think that I remember seeing a case out of the Second Circuit about two years ago which actually used this analyis to find some corporate officers liable and others not.

Also, look at a case called Connors v. Paybra out of the Southern District of West Virginia in the early 1990s. Finally, I think Reich and Luftman published an article regarding this on Benefitslink a while ago.

[Guest PTE]

Found the link to the Reish and Luftman article--

http://www.benefitslink.com/reish/articles...s/blurline.html

[Guest PeterGulia]

In addition to the suggestion that you get legal advice for yourself, if any individual asks your thoughts you might suggest that each individual may need his or her own separate lawyer.

Also, before you think about volunteering information to the DoL you should get legal advice about your service contract and other obligations to the employer.

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[Guest Rena Breeding]

My sister's company had the bookeeper embezzling funds and not submitting the salary deferrals. The bookkeeper is doing time in jail and the courts is having her house sold to pay back the plan. Her company had enough cash to make good the deferrals in the meantime.

[Guest Off_the_record]

Without further facts, it is hard to answer yoru question. How long was the plan in place? Do you have an institutional trustee, or an individual?

If (more like when) the DOL gets involved they will try and "find" a source to make the plan whole. I think it is a good case to say that an institutional trustee should have put on notice (if the plan has been in existence a long time) that something was amiss when no money was entering the trust.

Good luck.

[david rigby]

If there is E&O coverage, the carrier should probably be notified, but I suggest that you let your attorney do that.