employer makes incorrect deferral amount to employee

[kmciver]

I have a 401(k) where the employer incorrectly deposited $1,020 too much into an employees' account (a key employee, no less). Do we refund the employer? Is there anything else that needs to be done to keep the plan in compliance. It was truly a mistake by the bookkeeper.

[david rigby]

I'm no expert, but it sounds like you have two things going on:

- if an incorrect amount was credited to an account (not "deposited"), then fix the recordkeeping;

- if an incorrect amount was tranmitted to the trust by the plan sponsor (that is, "deposited"), can it be fixed by netting the excess against the next deposit?

Might be other issues.

[Brian Gallagher]

The way we do it, is remove the incorrect amount +/- earnings and put the money in a suspense account. The company can short its next check by the amount removed. Thus, the money stays in the trust.

The only way the money can go back to the company is if the transaction was a mistke of fact. Which certainly sounds like is <U>not<-U>.