Election Not To Participate

[Guest Mbrockway]

An employee elected to opt-out of the plan a few years ago. Not sure why, but for 2003 this same employee attended an enrollment meeting and decided to make an elective deferral agreement and started participating. This went on for a few pay periods (until employer noticed) and deferrals were stopped.

I'm not finding a lot on this subject. Could this be classified as a true mistake of fact? I'm looking for a way to get the money out of the plan.

[david rigby]

Unless I completely misunderstand your facts, it sounds like the employee elected to defer. But perhaps you should explain what you mean by "opt-out of the plan".

[Guest Mbrockway]

The Employer is allowing an eligible Employee to elect ,irrevocably, to opt-out. The Employee, prior to his plan entry date, filed an opt-out election, in writing, with the employer.

See 1.401(k)-1(a)(3)(iv).......and §1.410(b)-6 for info on the Irrevocable waiver.

[Tom Poje]

ugh. I doubt you will anything on something like this.

ee elected out, so allowing him to defer is failure to follow terms of the document.

The idea of self correction is to put plan in a position as if error had not occurred.

In the past, ees who deferred and shouldn't have were simply refunded the $. But now the recommended method is to leave the $ in the plan and retroactively enter those people. But that is for ees who failed plan's eligibility, which is not the case at hand.

If an ee has an excess deferral, a correction can be made even before plan year, so there is a precedent for removing $ from the plan.

EE elected out so perhaps one could argue his deferral limit is 0.

Also, if I recall the situation if an ee takes a hardship and inadvertantly defers, the method is to return the $ plus earnings. at least under the correction program. now I don't remember what the correction method is.

[Guest Mbrockway]

For testing purposes, would you count the employee in the ADP test if there is not a way to get the $ out of the plan? Would the company be obligated to match the deferral? Opinions are appreciated!

Oh boy. This is not the kind of thing I like dealing with 1st quarter!

Thank you Tom for your insight.