Simple IRA

[WCambridge]

What is the name of your state (only U.S. law)? CA

I'm not sure how to open a dialogue with my employer about my situation.

During my hire, I had an agreement with my employer that they are to open a simple IRA account for me where I make a voluntary contribution towards my IRA account, done on a weekly payroll deduction, which, they are supposed to 'match' my contribution. This account was opened. I was hired 2003.

My question/concern are the following:

Last year 2011, they've taken out the scheduled 'x' amount of money from my weekly pay and designated this as 'Employee Contribution', which they are supposed to deposit to my IRA account. They did this all year long.

When I got my year end statement from my IRA account, it is showing only 2/3 of the total amount of *my* 'contribution'. My last paycheck stub showed the total proper amount designated for my IRA (x amount times 51 weeks), in addition, an amount designated as "Employer Contribution' (their matching contribution), which is only 20% of the total amount of my contribution.

I received my W2 and this reflected what my last paycheck stub showed. However, my problem is they did not deposited the entire amount of my contribution in my IRA. They only deposited 67% of what they took from my paychecks, or what they show on my W2.

Isn't this a violation? Also, since we have a signed employment agreement that they are to 'match' my contribution, and had not done so all these years, is this also unlawful?

I would like to know what my legal rights are about this, if any, prior to speaking with my employer about it with them...

Thank you.

What is the name of your state (only U.S. law)?What is the name of your state (only U.S. law)?

 

[swalsh411]

Is this an employer sponsored plan like a SEP or just something on the side they agreed to contribute here? Either way, it is a major fiduciary breach if they have taken money out of your check and not deposited it.

 

[davew128]

You have only one gripe: That your deferral contributions are not being timely deposited into the custodial account. That's it. There is NO requirement under tax law that an employer match funds in a SIMPLE each and every year according to "an employment agreement." SIMPLE matches are prescribed by law. Go through your broker's records and match up your withholdings and deposits. If matches aren't being made (they must by law), then go to the IRS.

 

[swalsh411]

That's not neccessarily true Dave. If this is an employer sponsored plan and the plan document says there will be an employer match, then the employer has to follow the plan document. To do otherwise would be an ERISA violation. Also, it would be the DOL to contact not the IRS. The IRS would only care if there was a taxation issue or the W-2 was not correct.

 

[davew128]

That's not neccessarily true Dave. If this is an employer sponsored plan and the plan document says there will be an employer match, then the employer has to follow the plan document. To do otherwise would be an ERISA violation. Also, it would be the DOL to contact not the IRS. The IRS would only care if there was a taxation issue or the W-2 was not correct.

Yes it is nost certainly IS true. This is a SIMPLE IRA. It is not a qualifying plan and not subject to ERISA or reportable to DOL. Matching requirement are spelled out in the Internal Revenue Code and there is no "plan document". Matches are required within certain specifications for participating employees and/or all employees under a safe harbor. At no point is "ZERO" ever an acceptable option under any circumstances in any year.

Retirement Plans FAQs regarding SIMPLE IRA Plans

 

[WCambridge]

Thank you for the responses. I'd like to answer this question first...

>>Is this an employer sponsored plan like a SEP or just something on the side they agreed to contribute here? <<

It was something I had negotiated with them during the interview process. My last employer was providing us the plan, and I told them this existed with my current employ when they first asked me what my total compensations were with them. They agreed to the set one up for me if I decided to work for them. The written agreement stated they are to match it dollar for dollar not-to-exceed $5,000.00 or as allowed by law.


In speaking with the company the monies goes to on my simple IRA, he commented the employer's portion of their contribution is wholly dependent upon which program I signed on upon. He's a bit guarded in his information with me. He's vague, or should I say, non-direct in his suggestion other than to tell me I should speak with them (employer) ASAP since the funds are setup to go directly to investment plans, and not having the monies there can further 'hurt' me since I could technically be losing out on making some earnings on them.

Apparently simply IRA caps the employer's contribution to 3% of my total compensation. I was told 2011 / 2012 maxes out @ $11,500.00. Since technically, they didn't have this program and only set one up specifically for me, it is 'elective'. Hence, they should be contributing the 3%. Had it been non-elective, or a program available for every employee, they are only required to make a 2% annual contribution - whether or not the employee elects to make his/her annual contribution.

Please correct me if I'm wrong with this understanding.

Having said that, in cruising through my year end statements since my hire, they have not conformed within the guidelines I stated above. The most they contributed on is $2,300.00 which is way under the 3% max.

I don't mean to sound trivial here. I know times are tough for many folks, but I had done more than my share for my employer. I more than gave them what they bargained for with me from the beginning, in addition to taking a pay cut (they orignally said just for 1 month, then asked for an additional 4 months - which they said they'll pay me back as soon as they received monies from their billings. A year passed and no mention of this, yet they haven't re-instated back my normal pay. When I finally inquired and pointed out it has gone longer than the promised, they just told me they didn't know how much longer - plus told me they won't be able to pay me back whatever they 'cut' from me. At the beginning of this year, to further help them ease some of the financial stress, I decided to go under my wife's employment medical/dental converage and free them from putting out the monies for this. They were originally supposed to provide these coverage for both of us.)

 

[davew128]

It was something I had negotiated with them during the interview process. My last employer was providing us the plan, and I told them this existed with my current employ when they first asked me what my total compensations were with them. They agreed to the set one up for me if I decided to work for them. The written agreement stated they are to match it dollar for dollar not-to-exceed $5,000.00 or as allowed by law.

Irrelevant. SIMPLE plans are dictated under 408(p) of the tax code. Period. Your employment contract cannot impose any limitation on a SIMPLE match. Your match is 3% of eligible compensation, end of discussion.

In speaking with the company the monies goes to on my simple IRA, he commented the employer's portion of their contribution is wholly dependent upon which program I signed on upon. He's a bit guarded in his information with me. He's vague, or should I say, non-direct in his suggestion other than to tell me I should speak with them (employer) ASAP since the funds are setup to go directly to investment plans, and not having the monies there can further 'hurt' me since I could technically be losing out on making some earnings on them.

Which means they don't know.

Apparently simply IRA caps the employer's contribution to 3% of my total compensation. I was told 2011 / 2012 maxes out @ $11,500.00. Since technically, they didn't have this program and only set one up specifically for me, it is 'elective'. Hence, they should be contributing the 3%. Had it been non-elective, or a program available for every employee, they are only required to make a 2% annual contribution - whether or not the employee elects to make his/her annual contribution.

Please correct me if I'm wrong with this understanding.

That is correct but you're not understanding the max out part. That part is YOUR contribution not the employer's match.

Having said that, in cruising through my year end statements since my hire, they have not conformed within the guidelines I stated above. The most they contributed on is $2,300.00 which is way under the 3% max.

Honestly you need to deal with a retirement plan specialist. You're being short changed on the match, your contributions not timely deposited if at all, and you could theoretically be due implied investment earnings on the uncontributed money from the employer due to their malfeasance.

 

[WCambridge]

Thanks for the response, DaveW.

I am presently preparing a comprehensive spreadsheet with appropriate back-ups (Y/E Statement, W2s, Y/E Paycheck stubs, etc...) to show yearly employee/employer contributions.

I agree in that I will just stay with the 3% Employer contribution instead of whatever language there is on our employment agreement. Doing it this way, based on the information base stated above; I'm 'shorted' a total of 43% of what they should've put in to my SIMPLE IRA (2003-2011). This is in addition to the monies *I* contributed on my own last year that they still have not sent to the IRA company.

Pickle is, how do I present this without the threat of possibly losing my job (?). But, I know this is the bidge I must cross at this time..

Thank you.

 

[Kiawah]

Why is it now, that you are just questioning deposits that they allegedly should have made dating back to 2003?

 

[WCambridge]

Hello Kiawah-

Honestly, part of it is sheer ignorance. Partly 'trust'. Hard to 'think' the people you work for could do anything out of the norm. These IRA deductions, for me, was one of those things where you don't *see* the monies and transfers, so it doesn't really 'register'. Sort of out-of-sight, out-of-mind.

When I first inquired about the inconsistency in the deposits a few years ago, it was presented that they were just 'late' in their postings. There were a couple of years when they did in fact 'made-up the deposit (the particular years when I asked). After that, I never did inquire anymore.

As for the 3% max employer contribution, I simply didn't know that until now. They were depositing their contribution share anywhere from 1.3% to 1.5% mostly to a one time high of 3% (what they were supposed to do every year in the first place) of my total annual compensatory scale...

 

[davew128]

What does your annual plan document issued by the custodian say? Worst case scenario, is that the plan in its entirety ends up being disqualified and all the money in all employee SIMPLE accounts immediately becomes taxable. The problem IS fixable from the employer's end.

You have two legitimate gripes.

One is the failure to deposit your contributions within 30 days. It is quite honestly inexcusable. You could have financial damages calculated from the 30 day mark to whenever the money is deposited if at all.

The other is the failure to match. If they go non-elective and decide to put in less than 3% when allowable, YOU HAVE TO BE NOTIFIED. They have until the extended due date of THEIR tax return to deposit those matching amounts.

If you have the numbers documented talk to your employer. This is fixable without tax armageddon SIMPLE IRA Plan Fix-it Guide ? Common Problems, Real Solutions

However be prepared to go to an employment attorney if they balk or fire you.

 

[WCambridge]

DaveW-

Thanks so much for your continued interest and information.

Just for information, my custodial agent is UBS. I've been going through my past years 1040s, along with UBS' reports and are trying to put them altogether this evening. I just read tonight their annual IRA disclosure did state the employer is to notify me at least 60 days if they are to contribute less than the 3% to the program. I never received such a notice with maybe the exception of what happened last year.

As I mentioned above, back in April 2011, when they first asked me if they can 'cut my pay', I asked via email if this cut will be in addition to momentarily stopping the contribution to my IRA as well (as a result of previous tentative discussions within our office about everyone needing to think of where we can all make individual sacrifices until things get better. My IRA was casually mentioned), which they in turn advised that to be so. Although temporarily, they implied they don't know when they can start that over again. Again, not knowing they were supposed to maintain the 3% threshold to keep the SIMPLE IRA intact, I stayed mum about this. Yet, for 2011, they reported they actually deposited the $1,500.00 as their contribution as shown on my UBS Y/E statement anyway. All the prior years since my hire, with the exception of one, they've all been way less than the 3%.

In going over every year's statement and matching them all up, none of the numbers are actually 'matching up'. For instance, 2009: UBS reported employee's contribution vs. W2 shows a minus $800.00 differential. 2010 shows -$1,800.00. Last year, I put in $7,650.00 and UBS only reported $4,650.00 deposited, -$3,000.00 differential. From my last conversation with my UBS, I specifically asked if the checks they received in the past clearly labeled what's employee's vs. employer's contributions were. His reply was the checks were distinct and clear.

This is like quicksand, in that, the more I dig in, the quicker I'm finding a lot of either impropriety or inconsistencies in the reports. This, in addition to their fluctuating, mostly lacking yearly contribution amounts.

It goes without saying a large part of the fault lies with me for not being more 'aware' of this matter. Honestly, I didn't know any better. It is only now that I'm paying more attention to it that these things are all coming head-on with me because, along with the cut in pay, medical coverage, etc..I'm beginning to feel the kick in my gut and take notice.

You mentioned there may be tax implication if the IRS deemed my IRA disqualified due to this non-conformance on their part. My question here is, will this be against me (tax liability) even if the impropriety is not caused by me? Also, you said they can fix this all up if they acted accordingly not later than the approaching year-end Tax (I presume that to be March 2012) period, *fixing* as meaning making up all the residual amounts to make up the 3% every year since the program inception (beginning 2003), or just the last current year (2011)?

Thanks again...