Amnesty for Pension-Pinching Employers
The Labor Department today will announce a program that gives a second chance to companies that diverted money that should have gone to their employees’ savings plans.
The Pension Payback Program, which will run through Sept. 7, will allow employers to restore the money they owe to the 401(k) plans--plus interest--without penalty from the Labor Department, Justice Department or the Internal Revenue Service. Under federal law, delinquent employers could face criminal penalties.
The amnesty program is part of a Labor Department effort to crack down on employers who illegally dip into company savings plans by using the money withheld from employee paychecks to pay corporate bills. The department has more than tripled the number of civil and criminal investigations of companies suspected of diverting employee funds. Approximately 600 companies are under investigation.
The department also wants to require companies to deposit the withholdings into the savings plans within a few days after a pay period. They now have up to 90 days.
Labor Secretary Robert B. Reich said Tuesday that the goal of the new program is “to give employers . . . an opportunity to clear the books. We want to make sure that employees get full restoration of pension contributions and earnings as quickly as possible.”
The 401(k) plans--named after the section of the federal tax code that authorizes them--are the fastest-growing retirement plans in the U.S. workplace. There are 140,000 plans covering 22 million workers with total assets of $522 billion. Unlike traditional pension plans, none of these plans are insured by the federal government.
The amnesty program is, in part, a recognition that the federal government doesn’t really seem to know how many employers are complying with the rules for funding savings plans.
“We don’t know how many employers will take advantage” of the amnesty program, Reich said. He said Tuesday that “the vast majority of 401(k) plans are administered correctly. There is no reason to suppose that the system is broken.”
Not everyone will be able to take advantage of the amnesty program. Employers that are currently under government investigation, those that fail to make timely contributions after April 5 and those that have unpaid contributions that exceed the total amount of money withheld from employees for calendar 1995 will not be allowed to participate.
