Vigilant Blog

News, trends and analysis in employment law, HR, safety & workers' comp

Apr 14, 2011

CEO and Chairman convicted of embezzling employees’ 401(k) funds


In case you had any doubt that the Department of Labor means business when it comes to its enforcement initiative to protect participant contributions to employer-sponsored retirement plans, look no further than our own back yard. In a recent decision, the Ninth Circuit U.S. Court of Appeals affirmed the criminal convictions and $20,000 penalties imposed on a Seattle CEO and Chairman who were found to have embezzled employee funds from their company 401(k) plan to pay their companys operating expenses (United States v. Eriksen, 9th Cir, Mar. 2011). We have previously reported on the DOL enforcement initiative to protect workers pension plans.

Tips: Contributions to an ERISA pension or health plan that are withheld from employees wages (for example, 401(k) contributions or health plan premium contributions), are plan assets and must be deposited in the plan as soon as they reasonably can be segregated from the employers assets. The DOL has created a “safe harbor” for small plans (fewer than 100 participants), which presumes that participant contributions are deposited in a timely manner if deposited within seven business days from the date they are withheld from employees wages. There is no safe harbor for larger plans, so contributions should be deposited into the plan as soon as possible. Depending on a government enforcers assessment, “as soon as possible” for a larger plan could require a speedier deposit, or it could be as late as the 15th business day of the month following the month in which the contributions were withheld from the employees wages. Contact your plan adviser with questions.

This website presents general information in nontechnical language. This information is not legal advice. Before applying this information to a specific management decision, consult legal counsel.