When Employers Fail to Properly Contribute to their 401(k) Plans Section 515 of ERISA requires that every employer make contributions under the terms of the plan, to the extent not inconsistent with law. But the question often becomes when does an employer have to make the contributions under the law? When must employers deposit employee withholdings into a 401(k) or pension plan? The answer is as soon as practicably possible, but not later than the 15th business day of the month immediately after the month in which the contributions either were withheld or received by the employer. See 29 C.F.R. Sec. 2510.3-102 What if an employer fails to contribute the withholding or is delinquent? If an employer fails contribution or is delinquent in its contributions, participants in that plan may sue under ERISA Section 502(g)(2) in conjunction with Section 515 to recover delinquent contributions owed. If the participant is successful, the court will award the plan unpaid contributions, interest on unpaid contributions, an amount equal to the greater of interest on the unpaid contributions or liquidated damages in amount not in excess of 20 percent, and attorneys fees.
What if the company spent the money and does not have any?
Contributions spent by the employer are a serious breach of fiduciary duties. ERISA has provisions that can hold the fiduciaries personally liable under ERISA Section 404(a)(1)(D) in conjunction with ERISA Section 409(a). In other words, just because the business doesn’t have any money, doesn’t mean that the fiduciary does not have to pay. |
