Voluntary Salary Reduction form was signed by mistake; employer won't let me out of the election

[Guest arose]

Stated simply, a Voluntary Salary Reduction Form was signed by error resulting in lower PERA benefits. The employer will not make the correction.

What are my options?

[jsb]

?? What are PERA benefits?

Generally, what was the error? Did the employee not understand what they were signing? Did the employee sign up for something they are not eligible for?

[Guest arose]

PERA benefits are retirement pension funds. Employee, now retired, did not understand what was signed. Cafeteria Plan was new change for company. Employer states correction is impossible. Three months of health insurance were posted as pre-taxed resulting in loss of thousands of dollars in future pension income for retiree.

[mbozek]

I think this question is to complex for this board. For one thing you have not adequately explained what the dispute is about and PERA is not an identifiable term. Second you have not stated why the employer cannot make the correction, e.g., the employer may have transferred the funds in question to another party. You should consult cousel to see if there is a remedy.

[Guest arose]

My health insurance premium was paid on a pre-taxed basis thus less taxes were paid. It should have been paid after taxes.

My employer claims an error like this cannot be corrected. Is this true?

[Guest b2kates]

You do not state the time period involved.

Generally, corrections may be made within 3 years.

It means issuing corrected W-2s, and adjusting the FICA tax.

To the individual it means that they likely need to file amended tax returns and pay additional income tax and penalty and interest

[Mary C]

Corrections to past elections can be made in extreme instances, but the regs require that once an election is made, it must remain in effect for the entire plan year unless certain events have occurred. AND AROSE SIGNED AN ELECTION FOR PRE-TAX CONTRIBUTIONS! The regs do consider a mistake of fact a reason to change the election, but the example given to satisfy the consistency requirement is someone enrolling in dependent care account who does not have any eligible dependents as a mistake of fact. I don't see how a mistake of fact can occur in electing pre-tax contributions vs. after-tax contribuitons. And I don't understand how this majorly reduced retirement benefits since most plans base their calculations on gross income, not income after pre-tax contributions, and income earned over a number of years, not just one or two.

[GBurns]

Looking at CalPERS and most state reirement systems I see no connection between the amount deducted on a pre-tax basis for health insurance etc as having any effect on the eventual retirement benefit. The calculation formula is based on other factors.

I think that you were either given questionable information or you might have misunderstood. I suggest that you re-examine the facts and get the calculation formula in writing and then have it explained to you by a financial planner or competent professional, if you still have a problem with what is explained to you by the Personnel or Retirement Benefits Office.

This is a link to the CalPERS Q&A:

http://www.calpers.ca.gov/retire/contribution-faqs.htm

If you are in one of the PERAs that do not use Gross Paybut reduced the applicable salary by the section 125 deduction (such as Co or MN) 1 or even 2 years of mis-deduction should have no effect as is indicated in this link to the Colorado PERA:

https://www.copera.org/secure/Calculators/hascalc.jsp

Notice that there is a limit to the creditable salary:

NOTE: Annual salary increases are limited to 15% per year regardless of the values entered.

[Guest bmaverick2]

Mary, I agree.

Corrections are only in the rarest of cases. Looks like a hanging chad issue. If a participant chose wrong, how long before they approached HR/Payroll and asserted the error. Clearly it should have been a short period.