New York, NY (PRWEB) March 10, 2015
On March 9, 2015, as part of its A Deeper Look news series, the New York-based accounting firm Gettry Marcus CPA, P.C. comments on the risks for employers when timely payments are not made on employee defined contribution employee benefit plans.
According to Howard Fine, Partner at Gettry Marcus, and Sharon Brenner, Director of Accounting & Audit, employers offering a “defined contribution pension plan” are obligated to contribute participant elective deferrals and participant loan payments in a timely manner, as defined by the terms of the plan and Department of Labor Regulations (if the plan includes language about the timing of deposits). If employers fail to make timely payments, the plan could be subject to penalties or disqualification.
“This can be corrected under the IRS Employee Plans Compliance Resolution System (EPCRS),” says Gettry Marcus in their latest article. “But, this type of mistake can also lead to a prohibited transaction. A prohibited transaction cannot be corrected under EPCRS. A prohibited transaction is a transaction between a plan and a disqualified person that the regulations prohibit. An employer is a disqualified person. The employer must correct this and pay an excise tax of 15% for each year until corrected. If the employer doesn't correct the transaction, an additional tax of 100% of the amount may be due.”
According to Fine and Brenner, the Employee Benefits Security Administration prescribes a four-step process to correct violations:
1. Identify the violation and determine if it is covered by the VFCP. The VFCP provides a list of transactions that can be corrected by this program.
2. Follow the VFCP's process for correcting your specific violation, such as restore to the plan the deposit amount involved.
3. Calculate and restore any losses or profits with interest.
4. File an application with the appropriate EBSA regional office that includes documentation showing evidence of the correction.
To avoid violations, Gettry Marcus recommends that employers establish a procedure requiring that deferral deposits and participant loan payments “be made coincident with or immediately following each payroll.” According to the article, the IRS recommends that you discuss with your payroll provider the earliest date you can reasonably segregate the elective deferrals and loan payments from your general assets.
About Gettry Marcus:
Gettry Marcus CPA, P.C. is a Top 200 firm nationally with offices in Woodbury, Long Island and New York City. We provide accounting, tax, and consulting services to commercial businesses, high net worth individuals and various industries which include Real Estate and Health Care. We have one of the premier and most credentialed Business Valuation and Litigation Groups in the New York Area.
Our experience in diverse industries and a highly talented and experienced professional staff gives us the ability to share valuable insights into our clients’ businesses, to better understand their goals and problems and to help them attain the vision they have for their company.
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