Jail Time for Messing with Employee Contributions to Retirement Plans.
Every now and then we hear about a small business owner (not any of our clients) who is tempted, during tight times, to dip into employee contributions to retirement plans or tax withholdings as a “loan” until cash flow improves. Not a good idea. In fact, the idea is so bad it’s criminal.
Case in point: a federal district court in Maryland recently sentenced a business owner to one year in prison and $354,175 in restitution for violating the federal employee benefits law, ERISA. The owner and CEO of NW Systems Inc. pleaded guilty to one count of theft or embezzlement from his company's employee benefit plan.
The court's action followed an investigation by the Department of Labor’s Employee Benefits Security Administration (EBSA), working with the Office of the Inspector General, which revealed that the owner failed to deposit employee contributions to the plan as required. Instead, the owner used the funds for his own personal expenses and to pay company bills. This was basically stealing, and it had the same result – jail time.
Human resources and legal professionals may want to file this case away, in case it is ever needed to convince decisionmakers not to play with withheld taxes or employee benefit plan contributions.