Failure of employer to withhold

[Guest BillClinton]

A client of ours had a system glitch where about 30% of participants did not have any amounts withheld from they paychecks for their 401k for 1 pay period. Also employer matches were not calculated for those same employees.

Is the employer under the obligation to figure out the total amount of this error and take corrective action? Are they subject to any ERISA penalties for this type of error? Are they any other problems that they could be in because of this?

Thanks for the help

[austin3515]

Check out Rev. Proc. 2002-47. When eligible employees are excluded from a 401(k), the Procedure talks about contributing amounts equal to the ADP and ACP. You might want to tack on some earnings.

[GBurns]

BillClinton,

You post refers to these affected persons as "participants" outlines a failure to withhold and refers to the incident as an "error".

I read your post to state that these are eligible participants who made valid elections to have contibutions deducted from their salary etc, but because of this "error" the deduction (reduction) was not done. Did I read you correctly?

I ask because the first response that you got talks about "eligible employees are excluded", ADP/ACP testing and "tacking on earnings". None of which seems relevant.

Can you clarify your post or correct my reading?

[austin3515]

What is your deal?

It was a suggestion. If you can't see the correlation between my response and his question you've got issues.

[Tom Poje]

austin:

under the self correction program, if the person has the chance to defer for at least 9 months, the employer does not have to make a corrective contribution. (mainly because the employee could probably adjust his deferral rate for the year or period to make up for the problem- but being fair, if the document does not permit election changes other than quarterly, I am not sure how one really handles it.) example 7 of Appendix B section 2.02

but have recommendation on reading the xample for issue like how to handle associated match contribution.