Voluntary Contributions made, though not allowed

[imchipbrown]

I've discovered several deposits to a 401(k) Plan participant's individual "brokerage window" account during 2011. These were not disclosed to the Trustee nor was permission requested. I suppose the brokerage mailed monthly account statements to the participant, with an deposit slip to add more funds if desired.

To my mind, these are Voluntary Contributions. The document does not (and didn't) allow these at the time they were made.

Can the Plan do a retroactive amendment to allow the voluntary contributions? Can this be done using the voluntary self-correction program? Ever see this? I haven't.

[QDROphile]

If I were the IRS I would not approve for several reasons, but the real IRS might if the individual was not an HCE. An informal call to the IRS would be helpful.

Whatever happens, the plan administrator needs to get to the bottom of the problem, and one aspect of the problem appears to be that the brokerage window is broken. What happened should never have happened, but similar things happen sometimes when brokers are involved don't know enough or care enough about compliance I would start from the proposition that the provider should be fired, and then see if the provider can explain why the provider should not be fired. One reason might be that the plan administrator or the employer is a screw-up. I repeat, something is fundamentally wrong for this to have happened.

[imchipbrown]

The Plan opens individual (non-custodial) Schwab accounts for its participants. The accounts are titled:

"Joe Blough and Betty Boupe, TTEES;

Atypical Company 401k Plan

FBO Ima Participant"

The company mails (or walks over) a bi-weekly deposit check with instructions on whose accounts are to be credited. Schwab dutifully divides the deposit among the accounts.

The Participant walked into a Schwab office one day and inquired whether he could make a deposit into his account. The Schwab employee says "no problem" and accepts the deposit.

This from the Trustee:

XXXien told me that when he went to Schwab he was told it was ok to make those deposits...

So, stuff like this happens, though in my decades of admin, I've not encountered it before.