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Monday, April 28, 2014


BREAKING NEWS!! Steven J. Ingersoll's Smart School's Management 401(k) Fund Has $42,962 "Unresolved Contribution Delinquency"! 


Miss Fortune has discovered that Smart Schools Management, Inc. failed to transmit $42,962 (nearly half of the $96,592 in total contributions withheld from employee paychecks during 2012) into their respective 401(k) accounts within the legally-mandated time frame.

The Smart Schools Mangement, Inc. 401(K) Plan 2012 Department of Labor form 5500, filed on November 6, 2013, reveals that while Steven Ingersoll took an early, "in-service distribution" of $217,562 from the fund in 2012, the contribution delinquency is described as "pending" and appears to be unresolved.

While Steven J. Ingersoll is listed in the Smart Schools plan's 401(K) Department of Labor documents as its sponsor, Ingersoll does not utilize a third-party administrator to run the fund...he does that himself.

The plan's 2012 limited scope audit, conducted by Alpena-based Straley, Ilsley & Lamp, P.C., produced a "disclaimer" audit opinion.

A "disclaimer of opinion", commonly referred to simply as a "disclaimer", is issued when the auditor could not form and consequently refuses to present an opinion on the financial statements. 


Plan sponsors have a fiduciary responsibility to make sure the deposits are made as soon as possible. Employers whose plans have fewer than 100 participants must ensure that their payroll vendor (if payroll is done externally) or their internal payroll department deposits all employee contributions and plan loan repayments by the seventh business day after the paycheck from which those amounts were withheld is issued.

Employers whose plans have 100 or more participants (Smart Schools had 112 active participants in 2012) must ensure that all employee contributions and plan loan repayments are deposited by the earlier of (1) the date those contributions or loan repayments reasonably can be segregated from employer assets, or (2) the 15th business day of the month after the paycheck was issued.

In a cash or deferred arrangement, elective deferrals represent employee wages which the employee has chosen to defer receiving until retirement by allowing the income to be deferred to retirement income. In so doing, the employee permits the employer to withhold this salary from wages and deposit it into the 401(k) plan on behalf of the employee. 

To safeguard the employee's elective deferrals from employer delay and possible loss, the Department of Labor has specific rules regarding the allowable timeframe for the deposit of these funds into the 401(k) plan's trust. Once these elective deferrals are withheld from the employee's pay, they are not to be considered available for use by the employer but must be deposited as soon as they can be segregated from the employer's assets.


If one or two payroll cycles were late with deposits, or if Smart Schools Management, Inc. missed deposits for a handful of participants, generally, as the employer, Smart Schools would simply self-correct that issue by depositing the contributions and figuring out the lost earnings caused by the money not being invested in the 401(k) plan. 

In this case, however, paperwork was filed with U.S. Department of Labor regarding the “delinquent participation contribution”. 

Miss Fortune's in-depth review of Smart Schools' form 5500 filings from 2009-2012 shows compliance with the deposit guidelines until the wheels fell off in 2012.


Once a plan's sponsor realizes that a deposit is late, the sponsor must take steps to fix the situation, including making the deposit as soon as possible and adding any lost earnings on those deposits resulting from the late deposit.

If the problem persists and more deposits are made late or not at all, the plan's sponsor could be considered to be in control of those 401(k) plan assets

The 2012 report, the most recent available, shows net Smart School fund assets in excess of $3,000,000.

Moreover, if the problem goes on for some time and the plan sponsor does not report or address it using the self-reporting mechanism, employees or some other whistle-blower may report the plan sponsor for this violation. If the plan is audited as a result, the penalties for that breach will be far greater than they would have been if the plan sponsor had reported and addressed the issue.


Late deposits, especially as part of an ongoing pattern, could trigger a plan audit by the Department of Labor or the IRS.

If the Form 5500 reporting draws a DOL inquiry, the plan sponsor can respond with an explanation of what happened and what it did to correct the issue. If the failure is ongoing and egregious and the DOL determines that the plan sponsor did not handle the situation appropriately, the agency may launch a more thorough investigation. In these instances the DOL has the authority to add another 20 percent penalty on top of any lost earnings and excise taxes.

A spokesman from the Department of Labor's Cincinnati office explained during a conversation this morning with Miss Fortune that a plan audit is not considered public information, and even a participant "may not necessarily be informed" of a plan audit or investigation.


A disclaimer audit opinion letter is the worst audit report a company or fund can receive. Auditors issue the disclaimer letter to indicate they cannot form an opinion regarding the company's financial statements. 

Auditors also use the disclaimer when they refuse to issue an opinion on the company's financial statements.  Significant audit scope limitations (the inability to review a company's entire financial information) or companies who may file bankruptcy in the near future may also receive audit disclaimer opinions.

Here is the basis for the auditor's opinion, taken directly from Straley, Ilsley & Lamp P. C.'s report and explaining that the firm did not receive "sufficient, appropriate audit evidence to provide a basis for an audit opinion of the 2012 financial statements:

If I were a fund participant, I'd get my worry beads out...and then call my attorney!

Here's a list of "warning signs", developed by the Department of Labor:

1. Your 401(k) or individual account statement is consistently late or comes at irregular intervals

2. Your account balance does not appear to be accurate

3. Your employer failed to transmit your contribution to the plan on a timely basis

4. A significant drop in account balance that cannot be explained by normal market ups and downs

5. 401(k) or individual account statement shows your contribution from your paycheck was not made

6. Investments listed on your statement are not what you authorized

7. Former employees are having trouble getting their benefits paid on time or in the correct amounts

8. Unusual transactions, such as a loan to the employer, a corporate officer or one of the plan trustees

9. Frequent and unexplained changes in investment managers or consultants

10. Your employer has recently experienced severe financial difficulty

1 comment:

  1. I have never seen more dedicated teachers and staff than those employed at GTA. They deserve every penny they earn and more. I hope those individuals who did not receive their correct 401(k) contributions are banding together and contacting an attorney. More criminal counts need to be added to Steve Ingersoll's court docket.