What recourse does a TPA have against a former business owner/plan trustee who has failed to pay the TPA's bills, where:

* The business has terminated; and

* The plan has terminated and plan assets have been distributed?

For purposes of this question, I'm assuming that there are no written contracts which would make the individual personally liable for payment of the bills.

In addition, this question could apply regardless of whether the former business was a corporation, partnership, or other type of business entity.

Thank you in advance for any ideas.

It depends on who was the party that the TPA contracted with. If the contract was with a corporation which has disolved or gone into bankruptcy then there is little chance of any recovery because there are no assets of the corporation. If the other party was an individual who owned an unincorpated business then the TPA could sue the owner for the debt. Not having a written contract will make it difficult to provide proof of a debt that the owner agreed to pay. The TPA needs to retain counsel to determine whether there is any possibility of recovery because the claim will depend on state contract law.

I have a similar problem. I prepared the 5500s for a client and they haven't paid. The corp is still in business. What if any recourse is there. This was before we used engagement letters

Thanks

If they will not respond to your request for payment then your only recourse is to sue the cleint for payment for value of the work performed.

Further to this question, is it legal to withhold the 5500 for nonpayment? We do have a signed service agreement.

lindamichals - Does your service agreement cover this contingency? What does it say? I cannot recommend doing more work for a client who has not paid for prior work...

Our service agreement says that upon 30 days written notice, we may cancel the agreement if the employer fails to comply with the terms, conditions and spirit of the agreement.

So basically, if the client fails to pay us, we are not obligated to file the 5500 or continue to do any work for them is what I get from this.

I hate to bring up this old thread however I have the same problem. I prepared forms for the client and they never paid. Client shut down its business, however has not formally closed the business. A CPA informed me that I can write a letter to the IRS asking that they reject the 5500 as filed since the forms were obtained on a fraudulent basis. Thus the forms would now be considered late and they would have to pay late fees. Has anyone ever written such a letter so I don't have to reinvent the wheel?

1. The 5500 goes to the EBSA, not the IRS.
2. No govt agency is your collection agency.

Not likely the EBSA will reject the form based due to failure to pay the preparer.

Trying to get 5500's rejected because a client did not pay is childish at best. (Not that you could get them rejected anyway!!) Either seek legal action to obtain payment or let it go.

I am sorry that you think that this idea is childish. Everyone deserves to get paid for the work they do. I am merely pursuing all avenues in order to get what is rightfully mine. We do get personal guarantees from all new clients. However some of the older ones, don't have agreements. A CPA suggested this method, apparently he has used this before. I would think that he has used it to some success, otherwise why give me the suggestion? If I thought I could sue, I would have. The client is operating a shell company with no money. Do you work for free? I doubt it.

Which scenario puts you in a more justifiable position to be paid?

1) You prepare the annual valuation and Form 5500. The client accepts the work and the filing is made timely. Your work is complete.

2) You prepare the annual valuation and Form 5500. You make the indicated request of the EBSA/DOL. The client argues that your work was incomplete because the filing was rejected.

For what it's worth, the issue isn't justification. That is assumed. The client has an ethical problem. For my part, I hold the 5500 as the only leverage available....it usually works. Once that edge is lost, you can only hope they are honaorable. Or, for the really bad ones, sign on with a collection agency and hope for half the fee. Best of luck, and we are lucky that this is a very rare event.

WDK-

You make a very good point. Never thought of that.

Thanks.

goldtpa - Your CPA has no idea what he's talking about. If you wrote the IRS, it would get you nowhere and worse you come off as foolish. It's probably unethical (if you're governed by professional standards). Do you want the word to get around that you report clients, even deadbeats, to the IRS? Locust