Oh, the irony: CFO magazine makes mistake with its 401(k) plan
A magazine about financial reporting and corporate tax law, for corporate finance and tax officers, just made a big goof with its own finance and tax department.
CFO magazine publisher Alan Glass sent out the following email to employees on Friday morning:
I recognize that there has been considerable concern regarding the company’s 401(k) plan and that the management in New York held an impromptu meeting last week to discuss. I also received an email to the email@example.com account asking about this situation as well as an email from one of our Boston colleagues asking for clarification. Much of this was due to a misunderstanding on a process for funding the accounts with Fidelity. We had planned to fund the entire account for the May payrolls with money that was forfeited by employees who left the company. The forfeited funds are the matching money that the company puts into the accounts that vests over time and the forfeited amount is that which was not vested. We learned way too late that this money cannot be used to fund the accounts with money that has been paid by employees into their accounts and can only be used for the funding of the company’s matching amounts. It is not unusual for company’s to use forfeited funds since that money is in fact, the company’s to use for this purpose or to recover it back into normal operating accounts. The fact that it can only be used for funding the company match should have been caught earlier than it was, it wasn’t and that is an oversight that I am very sorry about. I also want to assure you that this has nothing to do with the company’s ability to meet it’s 401(k) obligations. Once this became known to us we immediately funded the accounts using a combination of cash from operations and the forfeited funds into the correct segment of the accounts.
The company’s obligation to fund both the employee and matching contributions are clearly stated in our plan as well as IRS regulations. Those obligations are to insure that the accounts are funded within 15 business days in the month following payroll (this applies to the employee contributions and not the matching funds, although we have always treated them the same even though IRS regulations allow for a longer funding period for matching funds). For example, in the case of the payroll that was just issued on July 15, the company’s obligation to fund the accounts must be completed no later than August 21. The company also must fund the accounts for the July 31 payroll on the same date. I’m unclear as to how quickly this shows up in our 401(k) accounts and have asked Louise to get clarity from Fidelity which will be communicated to you.
What I can assure you is that the company has met all of its 401(k) funding obligations through the June 28th payroll having funded both the employee and matching funds and has taken the necessary corrective actions to prevent this from happening again.
This is an unfortunate oversight that should not have happened and won’t again. It affects all of us and for that I am deeply sorry.
If you have any questions, please feel free to write me directly or through the firstname.lastname@example.org email account.