Erroneous Contributions to Terminated Plan

[Susan S.]

A SH 401(k) plan was terminated effective 12/31/2013. The employer continued to deposit deferrals and match beyond this date. What is the appropriate correction? Should these amounts be refunded/forfeited?

[Peter Gulia]

Are the plan's trustee and administrator satisfied that the amounts were paid under a good-faith mistake of fact?

[Lou S.]

Can you change the termination date?

[Susan S.]

Peter @ Fiduciary Guidance Counsel --Yes, the trustee and administrator are satisfied that the amounts were paid as a good-faith mistake of fact.

Lou S. -- Changing the termination date is not an option because they want to establish a SIMPLE IRA later this year.

[Lou S.]

How long did it continue?

Was it one pay period where it was attributable to 2013 hours worked or has it continued throughout 2014?

Is the Plan in the DL process or terminating w/o a DL?

[Peter Gulia]

If an employer paid a contribution by a mistake of fact, returning the mistaken amount (adjusted for loss, but not for gain) to the employer (within one year after the payment) is not prohibited by ERISA's anti-inurement provision.

The plan's administrator should check that the return would be consistent with the plan's documents.

In addition to paying the right wages that was due each affected employee, the employer should pay each something for the time value of money.

[BG5150]

Just curious: what kind of accounts were these? Are they with a big carrier? Individual brokerage accounts? Someone should have notified the custodian that the accounts should receive contributions any more.