401(k) Plan Audit Results in Lawsuit Against Architectural Firm

The Department of Labor (DOL) announced that it is suing the fiduciaries of the architectural company Milton Pate and Associates. Based on findings from a 401(k) plan audit, the suit alleges that Milton Pate, Sr. took a loan from the plan and is in default by $94,778. His son took out three loans from the plan and also has an outstanding loan balance. The third issue in the lawsuit—the hot-button issue for the DOL—is the delay in depositing employee contributions from employees’ paychecks into the 401(k) plan’s trust. Employers are required to deposit employee contributions “as soon as the contributions can be segregated.” This is a high standard. If you can segregate employee benefit contributions and make deposits in 24 hours, this becomes the standard to which you will be held.

The Employee Benefits Services Administration (EBSA/DOL) has significantly increased benefit plan audit activity. They caution employers that fiduciary responsibility over the operation and assets of their benefit plans is quite serious, including civil, criminal, and even personal liability for fiduciary breeches.
EBSA is committed to safeguarding employee contributions to 401(k) plans and to health care plans. It intends to identify and stop employer delays in forwarding employee contributions to the benefit funding vehicle or worse, converting the contributions to non-plan uses.
If you discover that one of your plans has not complied with timely deposits, there are steps you can follow to protect yourself from full fines and penalties, but the key is to identify and correct the problem before you are notified of an audit. Contact MSEC if you are interested in learning about the procedures EBSA/DOL offers.