forfeiture based on incorrect ACP test calculation

[Guest joanh]

A forfeiture was charged to my 401k account due to a caculation error by the company that manages the plan. As a result, five months later I received a check for part of my contributions, but not the assocatied match or earnings on the forfeiture amount. I believe that they should correct their error and restore my account to where it would have been had they correctly calculated the ACP test.

This is what I was told by the plan administrator:

"Sentinel calculated our IRC401(m) or commonly referred to as ACP test using the wrong year to date figures for you. As a result they concluded your contribution exceeded the plans 15% allowed. They took your YTD and divided your yearly contribution into it. It was higher then the 15% that the company allows. What they needed to do is confirm those figures below making the adjustment, but they did not. Even though they were wrong, there is nothing I can do to have the forfeiture amounts reversed, it is against the IRS's rules and regulations. As a result, you will

receive a 1099R after Jan. 1st and a check for the before mentioned amount."

Is what they did legal? If not, how should I proceed to have them correct my account.

[Earl]

Sounds like your stuck under the plan design.

Lobby your company to remove the 15% limit. That is archaic.

[david rigby]

...and ask whether the company is taking steps to ensure that future mistakes are caught before action (sometimes referred to as "checking your work").

[austin3515]

The letter essentially says that they took money away from you on the basis that your contributions exceeded the 15% limit of comp limit, but that in fact you did not exceed the 15% limit. The just made a mistake. But they're not going to fix it because the IRS won't let you? Don't believe them. The IRS has a whole program to correct mistakes like this (which do happen all the time). See IRS Revenue Procedure 2003-44 which is the IRS' correction programs.