Failure of employer/custodian to timely enroll employee

[Guest skiprx]

My wife enrolled in a 403(b) with her employer on 17Nov04 with the agreement to have all of her last 3 checks of the year deducted and contibuted to the TSA.

No deductions where made from the 27Nov04 or the 11Dec04 check.

The deduction calculated by the custodian's representative for was too high (there was not enough money left after normal deductions) so the employer took nothing out.

The Custodial agent and the payroll supervisor say that nothing can be done to correct the situation. The agreed total figure was in the area of ~$7500 and this failure will force us to re-characterize some investments.

The IRS said that I should tell the agent and the employer that a correction can be and should be made via rev. procedure 2003-44 and done as soon as possible.

I did mention the procedure but do not believe that anything will be done and that we will loose the benefit entitled to us.

My Question is, "Is there anything we can do to get the Custodian or the Employer to become enthusiastic about making a timely correction?"

[GBurns]

As far as I see the Rev Proc applies to corrections related to operational failures. What you have described is not an operational failure in my opinion.

If you look at your wife's Salary Reduction Agreement, there is most likely a disclaimer or wording that states that the deduction is not guaranteed nor is timely dedcution. It is also unreasonable to have expected it do have been done so soon anyhow, payroll changes take time and definitely Nov 27th was asking too much.

Additionally, regardless of what the IRS person might tell you there are laws and even CBAs that prevent reducing an employees salary below minimum wage, which is what might have happened here. There are also the questions of whether or not the payroll software would allow a reduction that large and also of the payroll software priority of deductions logic. If the software takes out mandated and/or previously agree deductions first, then of course there would not be enough left, so no TSA reduction.

The problem is not in getting the employer enthusiastic or making timely corrections. The problem is making late changes, too late tax planning, inconsiderate requesting of a deduction and trying to force what might be inapplicable.

Next time do things in a timely fashion.

[AndyH]

Hey GBurns, that rude comment is out of line. Once again.

[GBurns]

Rude? Where?

That is not rude, that is just advice as to how not to have a problem next time.

What do you suggest that he do to correct the situation that has occurred and how not to have it happen again?

Or do you think that is is the employer's fault for not processing the salary reduction in the 7 working days before the date of payroll (without giving any allowance for close off dates and processing time and assuming that it was handed in immediately)?

Or do you think that the employer should have taken the salary reduction anyhow regardless of the fact that there was not enough money? Have you ever seen a negative paycheck?

Or do you think that the employer should have stopped the payroll processing, called his wife and asked what should be done, then finish the payroll?

Or the employer should use the guidance in the Rev Proc even if it might not be applicable, but just because the employee's spouse says so?

Or do you think that the employer should be berated for not being enthusiastic?

[AndyH]

You know quite well that it is not what you said but how you said it. If you want to bait some of the regulars here that know your tactics that is one thing, but you should ease up on the new people.

[Guest skiprx]

Wow! Excuse me while I get up off of the floor. Thank you for the information, GB, it revealed quite a bit of data, a lot quite useful.

I agree that this was late planning, but we were attempting to do what was allowed with the time that we had left.

The agent informed us that what was agreed upon was doable. We were going with his knowledge and judgement. If he has inform us that we might be able to do one (1) check and not each of the last three (3), then we would have understood and done that.

If we came to you and asked you for your professional opinion in your area of expertise, then we'd expect an accurate reply. We "assumed" that what was being related was accurate.

If you wish to berate us for going on the "experts opinion", than knock yourself out. I "considered the source" in your reply anyway.

FYI: Not all of your colleagues agreed with you. After contacting legal counsel, the employer has requested return of paycheck funds and will redo the deductions.

And thank you for the advice regarding early planning. Next year has been planned appropriately.

Have a great holiday!

[GBurns]

Representatives/agents of any sort (whether fee based planner, full commission sales rep, enroller etc) has the purpose of making a sale. That is their whole reason for being. As such they are not a source for information that can be relied on, but to be taken and evaluated. That is why even your TSA brochure etc tells you that only what is in the contract is binding. The company does not even want to stand behind what their own agents might tell their prospective clients. Why should you take what is said any differently? How did you verify his "knowledge and judgement"?

The sales rep is not part of the employer's payroll staff. How can that sales rep makes representations about payroll processing? Why did you think that he could speak for the payroll dept and disregard what the employer has printed on the forms and documents?

It has more than once been published that the IRS telephone people have a high rate of giving wrong answers. What reason is there to first believe that the answer that you got was correct? What reason was there to even believe that the person understood you?

Those were my main reasons for "dumping" on you. The TSA world has had volumes of publicity about its questionable products and sales activities, so it was rather surprising that someone who has acumen and intelligence, after getting into this situation, decided to "dump" on the employer regarding being "enthusiastic".

[E as in ERISA]

Maybe there is something wrong with me, but I love GB's answer!