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I own a small business in Orlando, Florida. When business was booming I was advised to create a defined benefit plan in addition to our profit sharing plan. Now that sales are down I have elected, after 5 years, to terminate the plan. Because investments are also down there is a shortfall and I have been told that I will have to take part of my share and and give it to other participants to make their shares whole. It doesn't seem feasible to lower my retirement savings by giving it to others. To me, it would be more plausible if everyone shared in the shortfall which is how the profit sharing plan works. Is there any loop hole to keep my hard earned dollars rather then giving it to the other participants?
Unfortunately the point of a "defined benefit" plan is that the owner guarantees a "defined benefit" to his or her employees. In a profit sharing plan, if profit dips, then all, including the employer dip with it. In a "defined benefit" plan, the employer insures the amounts that other employees have in the plan. About the only loop hole you can choose to exercise is bankruptcy and insolvency of the firm--otherwise you as owner are responsible for refilling the shortfall that the definened benefit plan incurred. I am sorry. Sincerely, Dimitry Alexander Kaplun, Esq.
My wife posed the question you answered. We are aware of the law concerning the D.B.However, my problem is when the plan was created we met with our accountant the plan adviser and the attorney who looked over the initial plan that was created by a third party. No one at that meeting advised us that if there was a shortfall in the plan we would be responsible to make everyone else whole. The response when I posed the question was no one expected the stock market to tank the way it did. I don't think that is an acceptable answer. Would I have any recourse with these people. They all received fees and commission from us. But did not fully disclose the possible pitfalls in such a plan.
That is a different question altogether. You may (and I stress "may" because this is not a sure bet) have a malpractice suit against both the attorney and the accountant jointly and severally for breach of fiduciary duty for failure to disclose adverse financial implications. With a D.B. I am also surprised you did not use an NASD-FINRA licensed F.A. or broker to help you properly explain the implications of such an investment plan. That fact may go towards proving malpractice. In that case I urge you to contact both the state and local bar associations (for the attorney) and file a formal complaint. Then contact the state accounting board and do the same (just be aware that accountants typically have less liability in terms of investments and it is unlikely that this complaint would stick, unless the accountant was also a F.A.). Then contact a malpractice attorney in your area and have a consultation about a possible suit for damages against the attorney and the accountant. You would be able to sue for damages and fees (including attorney fees) from them both if the malpractice attorney decides to take your case. Sincerely, Dimitry Alexander Kaplun, Esq.
Attorney
JA Mentor, Licensed in PA & NJ, specialize in business/contract disputes, estate creation & admin