I must admit to being puzzled by the latest Department of Labor (DOL) lawsuit I reviewed. Earlier this year, the DOL filed suit against Jones Dykstra and Associates, Inc. and its co-owners for failing to remit nearly $44,000 in employee and employer contributions. The money should have been remitted from January 2016 to the end of 2021. The suit also contends the company failed to process requests for participant distributions from the plan and failed to ensure that all employer matching contributions were made to the plan.
It is easy to dismiss this case as an aberration, stating that it was a small balance plan with a reported headcount of only 4 participants. But let's not be hasty. An earlier DOL case involved $2 million in late or never filed contributions. I suspect if I did more research, I could find larger cases of "failure to remit".
But using this current lawsuit as a jumping-off point and based on 34 years in the industry, I wonder...
Should the Third Party Administrator (TPA) have taken a peek at this and questioned the missing money? I think about the TPAs I work with. Not only do they raise a red flag on late contributions or missing contributions but they also reconcile the books during annual testing and ask questions.
I primarily work with fully-bundled record keepers and TPAs. In other words, one company handles both sets of duties. Some of my fully-bundled companies are quite large and well-known while others are small. But all of them probe for missing or late contributions and ask the touch questions. And the stand-alone TPAs I have work with are detail hawks.
Thankfully my clients remit on-time (99%!) but my fully-bundled/ stand alone teams and I know how to handle failure-to-remit contributions going awry. And yes, I used to calculate loss-gain reports by hand in the early 1990s. Excel was a god-send when the company I worked for back then bought the Excel license. And I assume loss-gain calculations are now done by computer. Suffice it to say, a TPA should be on top of missing or late contributions.
Should the record keeper have taken a peek? I suspect the record keeper might also raise an eyebrow over missing contributions albeit this is less likely/ frequent. As one record keeper said to me, "Timothy, we take whatever money is sent and allocate it in a timely manner to employee accounts." Still, the record keeper taking a peek seems to have been missing in this latest DOL lawsuit.
Should the employees have taken a peek at their accounts? I have to wonder. While I understand that not all employees monitor their retirement plan accounts daily or even monthly, I encourage all of my employees to look at the account at least yearly. The DOL lawsuit seems to be alleging malfeasance on the part of the employer. But even in the absence of mischief, mistakes happen. A new contribution rate can be overlooked accidentally by the payroll department. It behooves the employee to review their account with some frequency.
Employees will typically review their accounts when requesting a distribution. Why did the employees not raise a squeak about the delayed distribution requests? Didn't they notice a discrepancy in their balance? Did they indeed even take a peek at things and ask questions?
The alleged behavior by the company as described in the DOL lawsuit appears to be inappropriate. The courts will figure out the facts of the situation and make a ruling. My view? It is better though to take peek on occasion from all sides and try to avoid this situation in the first place.