Employer fails for 4 yrs to make safe harbor contr.

[Guest Rockybuddy]

Hi,

I recently found out that my employer has failed to make safe harbor contributions for 2006 - 2010 to my account and even his own account which were required as part of the plan. I left the company in a downsizing in 2009. Late in 2010 he elected to revise the safe harbor part of the plan and made the 3% contributions optional. I am owed approx $11k. The plan administrator says they sent certified letters to my employer alerting him to make the contributions. My former boss claims his secretary threw them out year after year. All of my payroll contributions from my check however were made. My question is - what are my options at this point? The plan administrator claims they never called my employer about this and relied on the postal letters. The plan administrator knew contributions were not being made, but never contacted the employees to let them know. The plan administrator says they did what they were supposed to. Is that true? Should they have notified employees that contributions were not being made by my employer? The employer's business is almost bankrupt now and he is promising to pay, but I doubt it. Will he be able to shirk his responsibility to the plan in bankruptcy? Will the IRS go after him? What is the best thing I can do to recover my funds?

Thx for your help and input!

Rocky

[ETA Consulting LLC]

You should contact your local Department of Labor office. They'll initiate an audit and ensure your rights under the plan are inforced.

Good Luck!

[J Simmons]

Hi,

I recently found out that my employer has failed to make safe harbor contributions for 2006 - 2010 to my account and even his own account which were required as part of the plan. I left the company in a downsizing in 2009. Late in 2010 he elected to revise the safe harbor part of the plan and made the 3% contributions optional. I am owed approx $11k. The plan administrator says they sent certified letters to my employer alerting him to make the contributions. My former boss claims his secretary threw them out year after year. All of my payroll contributions from my check however were made. My question is - what are my options at this point? The plan administrator claims they never called my employer about this and relied on the postal letters. The plan administrator knew contributions were not being made, but never contacted the employees to let them know. The plan administrator says they did what they were supposed to. Is that true? Should they have notified employees that contributions were not being made by my employer? The employer's business is almost bankrupt now and he is promising to pay, but I doubt it. Will he be able to shirk his responsibility to the plan in bankruptcy? Will the IRS go after him? What is the best thing I can do to recover my funds?

Thx for your help and input!

Rocky

Demand the benefits quickly, and demand that they be paid from the plan (requiring him to contribute them to the Plan). I'd give him no more than 5 business days given the situation.

[Bill Presson]

Question though: Why was he supposed to make a deposit for 2010 if you left in 2009?

[Guest Rockybuddy]

Question though: Why was he supposed to make a deposit for 2010 if you left in 2009?

The deposit was not for me - but for other employees that are involved in 2010. December of 2010 he ammended the plan so the 3% contributions would not be mandatory. Thanks for reading and responding. I appreciate it.

[Guest Rockybuddy]

You should contact your local Department of Labor office. They'll initiate an audit and ensure your rights under the plan are inforced.

Good Luck!

Thank you for your advice!

[Bill Presson]

Question though: Why was he supposed to make a deposit for 2010 if you left in 2009?

The deposit was not for me - but for other employees that are involved in 2010. December of 2010 he ammended the plan so the 3% contributions would not be mandatory. Thanks for reading and responding. I appreciate it.

Ok. The wording just made it appear that we were just talking about your account.

No employer should be allowed to get away with this and the TPA should either get him to fix it or resign.

[Bird]

No employer should be allowed to get away with this and the TPA should either get him to fix it or resign.

Amen. I don't know how other people operate but we do financial statements and include the accrued contributions and look for them to be completed as we reconcile assets each year. To say "we sent a letter" is BS.

[doombuggy]

Keep in mind that the "plan administrator" may be the plan sponsor (your former employer) and NOT the TPA (the recordkeeper of the plan).

I second the advice of calling the DOL.

[Guest Rockybuddy]

Do you think that the TPA of my plan has any liability in this? Why didn't they contact the employees to let them know something was wrong for 5 years? I'm wondering if the TPA has E&O or liability insurance. Maybe they will be drawn into the fray after I file a DOL action. They never contacted my employer by phone and relied on letters sent to the bookeeper. It just seems a little strange.

[ETA Consulting LLC]

Not really. This TPA merely performs a service for the client and is not a fiduciary under the plan. You may be better served to direct the ownership of this failure to the Employer; as they are ultimately responsible as fiduciary to enforce your rights under the plan. The TPA would be out of line to notify you, but chances are they notified the employer several times regarding the need to fund the plan.

Good Luck!

[J Simmons]

Not really. This TPA merely performs a service for the client and is not a fiduciary under the plan. You may be better served to direct the ownership of this failure to the Employer; as they are ultimately responsible as fiduciary to enforce your rights under the plan. The TPA would be out of line to notify you, but chances are they notified the employer several times regarding the need to fund the plan.

Good Luck!

If the TPA is not the named "Plan Administrator" in the plan documents and has no discretion over whether contributions are made or discretion over how any remitted contributions are allocated, then I agree with toolkit that there is no claim by the EE against the TPA, and the only proper target is the ER and possibly the Plan Trustees. If the Plan Trustees were aware of the 3% of pay 401k safe harbor non-elective contribution hard wired into the plan, then I think the Plan Trustees had an obligation to take steps to collect it from the ER when not made by the proper deadlines.

[J Simmons]

Rocky,

What is your objective?

Is it to get your benefits from contributions that should have been made? Then I'd try to leverage it out of the ER (but do not cross the line of extortion/black mail--check the criminal laws of the states where you are located and where the ER is located).

Is it to get for the entire Plan the amounts due from the ER? Then the DoL is a good suggestion. However, if your concern is your own benefits being paid, you'll likely get more blood for yourself from this turnip of an ER if you deal with the ER and not the DoL. To satisfy you, the ER might contribute to the Plan what is owed to you, so that the Plan can pay you out. If the DoL get contributions out of the ER and all it can get is some of the money, the allocation will result in you only getting so many cents on the dollar.

[ESOP Guy]

No employer should be allowed to get away with this and the TPA should either get him to fix it or resign.

As long as the discussion seems to have gone to the TPA responsiblity I will add my two cents.

I just don't see it as the TPA's job to be the plan sponsors parent. We can inform and that is it. I just don't see a duty to resign because of this. I worked on client that didn't put the money in the plan for years. It turned out the CFO was no good. Once the owner knew of the problem he put the money in with back earnings.

We are TPAs not parents.

[K2retire]

I'll add that as a TPA we always find it preferable to have written proof that we notified the client. A phone call comes down to he said/she said.

[J Simmons]

I'll ass that as a TPA we always find it preferable to have written proof that we notified the client. A phone call comes down to he said/she said.

Hey, K2, it sounds like you've been around the block, or the back end of a donkey, a time or two.