There are no exceptions: Fiduciaries must forward employees’ 401(k) contributions to the plan in a timely manner. Failure to do so results in steep penalties.
While serving as fiduciaries of the now defunct Lunde Electric Company’s 401(k) plan, the company’s chairman and CEO failed to forward employee contributions to the plan in an attempt to save the sinking business.
Employees’ retirement plan contributions were instead used to pay the company’s operating expenses for more than two years.
The execs said they intended to repay the funds — presumably when business turned around. But it never did, and the funds where never repaid.
Violated federal law
Result: A federal court convicted the two execs of theft and embezzlement. In addition, they were found guilty of making false and misleading statements.
Turns out they also promised employees the company would make matching contributions into the plan — which never happened.
The punishment: Both the chairman and CEO were sentenced to two years of probation, a $20,000 fine and 240 hours of community service.
Cite: United States of America v. Eriksen (PDF)
