401(k) Election Not Implemented

[Guest kharris]

We offered an eligible participant a timely participation election form and he elected to have 10% salary deferrals made to the plan. However, for some reason the payroll system has not deducted anything from his salary. This has gone on for 18 months without the participant notifying HR. This employee is a foreign born individual living in the U.S. and doesn't speak much English. What are we obligated to do, if anything? Thanks.

[Guest kharris]

Has this not happened to anyone out there? The safest thing would be to perform a self-correction, calculate what he would have contributed, plus the match, give him money market earnings over this period, and be done with it.

But is this absolutely mandatory? Does the participant have an obligation to verify his salary deferrals are being deducted from his paycheck and notify HR if a problem occurs?

Thanks for any help out there.

[JanetM]

We advise all new hires to examine the first 3 or 4 checks closely. If there is any problem or any questions they should say so ASAP. On the 401(k) enrollment form - says - you will be notifed by recordkeeper that they have received your enrollment AND check your pay stubb to ensure you see deduction coming out. It is their responsibility to verify the accuracy of their pay.

IF they read the form to enroll - we feel we have notifed them. There are 12,000 employees in this company. I can't be mother to them all. Mistakes happen couple times a year.

[Guest kharris]

Thanks Janet.

Just trying to get a feel for what other companies do with a situation like this.

Kent

[RCK]

kharris,

You have stated the safe harbor approach--get the participant back to where they would have been, even if it is a windfall to them.

Janet M has stated the most aggressive approach.

That leaves a whole spectrum of choices in-between. I think that last time we encountered a situation like this (valid participant election not noticed for nearly two years), we made him whole up to the first statement date. Since it was a 401(k) with a pure profit sharing portion, he got a statement after a year or so showing a PS contribution and no 401(k) contributions. After that, we figured that it was his fault.

RCK