A client consulted Golan & Christie Partner, Andrew Williams, concerning a problem with its 401(k) plan. The plan, which had been amended by the financial institution providing services to the plan, mistakenly added a fixed rate of employer matching contributions, although the plan had previously contained a discretionary formula. The discretionary formula allowed the employer to determine the match (including the discretion to make no matching contribution) on a year-by-year basis. Unaware of the change, after the amendment, the employer elected to make no matching contributions as a result of declining revenues during a period of sluggish economic growth. A routine private audit of the plan disclosed the employer’s liability to fund the matching contribution at the higher fixed rate, in an amount of more than $200,000.

The client decided to pursue an administrative filing with the IRS under its Voluntary Compliance Program (“VCP”) to resolve the situation by retroactively amending the plan to eliminate the fixed formula for matching contributions and to replace it with a discretionary formula. The proposal conformed the plan document to the client’s actual contribution pattern. However, the IRS does not normally allow a retroactive plan document to “cut back” plan benefits. The client elected to have Golan & Christie prepare and submit a VCP proposal to the IRS that required only a retroactive plan amendment and no additional corrective payment. The unique proposal was accepted by the IRS, which granted a favorable “compliance statement” to resolve the matter for IRS audit purposes. As a result, the client saved over $200,000 in retroactive matching contributions to the plan and still obtained a favorable resolution of its compliance problem. Although this particular saga has a happy ending, the client may have avoided the problem entirely by having legal counsel review its plan document at the outset.

GOLAN & CHRISTIE OPENS NEW LOCATION IN NORTHBROOK

In a continuing effort to make our attorneys even more accessible to clients, the Firm is proud to announce the opening of our north suburban office at 5 Revere Drive in Northbrook. The new location, which is available for meetings by appointment only, is conveniently located just south of Lake Cook Road and quickly accessible to I-94.