Search the Community

An ER incorrectly contributes to a 401(k) plan an amount that is in excess of the amount that the EE elected. This happens once, and the correct amount is withheld and contributed in the next payroll period. The error appears to have been made when the first deferral election on file was not cancelled after a second deferral election was made. What is the best way to make the correction? Should the amount be returned to the EE from the plan (as compensation)? I can find nothing in EPCRS that addresses this situation. There is no excess deferral, just a one-time human (or perhaps computer) error.

I’m the sole employee of a company (S corporation) that just established & adopted a 401(k) plan in December 2012. My 2012 annual compensation from the company was $96,000 ($8,000 was paid on the first of each month). The company who help me establish the 401(k) & whose prototype plan was adopted told me that it was Ok for my company to write a check for 25% of my compensation ($24,000) & deposit it to the plan, which my company did. Since the plan also provides for employee deferral Roth contributions as well, they told me that even though the plan was adopted in December with an effective date of 12/19/12 that it was Ok for me to contribute $17,000 to the plan as an elective deferral Roth contribution for 2012. They said that since all my compensation was paid to me already for 2012 that I should just write a $17,000 check from my personal checking account & deposit it to the plan, which I did. I’m now wondering if I did something wrong by writing a personal check to the plan instead of having it come from my company. Also, if the plan effective date is 12/19/12, how can the company pay elective deferrals to the plan for compensation paid before the plan was adopted? The plan document doesn’t contain any language making it retroactive to the beginning of 2012. Am I Ok with how I did things, or should I be concerned? If this is a problem, how do I fix it? Thanks.