Recordkeeper Error - is my company on the hook?

[Guest Wappaus]

Hello,

I am he benefits administrator for a large company. Our 401k plan caps HCEs at 6% so we can pass our discrim tetsing. Our recordkeeper miscoded about 100 non-HCE employee's and capped them at 6% when they should not have in January. I just realized the extend of their error and I would like to know if the employees who were incorrectly capped can claim that they meant to contribute much more and demand that the company pay for the mistake.

If the employees do have a right to demand the exces contribution amount, will the company be liable or the recordkeeper?

Thanks,

Wappaus

[jpod]

May we have some more facts? I am not suggesting a resolution at this point; this is just fact-finding.

1. Were the 100 people told that they were being capped at 6% "because they were HCEs" and given an explanation of why "they were HCEs"?

2. Why don't you know exactly what percentage they would have contributed? I have the impression from your post that the 100 completed election forms specifying a %, but your recordkeeper capped them at 6%, thus their elections must have been for a % greater than 6%. Am I correct?

3. Are we talking about only 2007 and not any prior years? If it's only 2007, is it feasible to go to those 100 people who still work for the company and tell them about the mistake and give them the opportunity to make it up through the balance of the year? (This would stop the bleeding somewhat.)

4. Is there a Company match, and if so is it an annual match, or a pay period match with a true-up, or is it a pay period match without a true-up?

5. Does your recordkeeping admit responsibility, and/or has it notified its E&O insurance carrier?

[Guest Wappaus]

Actually it is about 160 people. They were not told that they were HCEs by the company, but when they went to change their election (automatic enrollment @ 4%) online, the recoredkeeper's program would not let them exceed 6% and when they called in to ask why, were told (by recordkeeper) that they were not able to because they were an HCE.

We have no way of knowing how much those who are currently contributing 6% would have contributed if they had the opportunity. Those who have been contributing 4% all year may not be able to claim that they are meant to contribute the full amount.

We are only talking about 2007, so yes, they can make it up but will have fewer pay periods to spread it out over.

We have a per pay period match with a true up.

Our recordkeeper has admitted responsibilty and has created other problems for us as well. We send them a weekly file from our payroll records and they have been incorrectly loading the file all year. The compensation they have listed for all of our eployees is wrong and has created disc. testing issues. Also, we have a large number of employees who are not auto enrolled as they should have been. We usually catch this about 3 months into employment. We have about 100 rehires every year. The recordkeeper (also our platform) has not reported this to E&O and has not offered to help pay.

May we have some more facts? I am not suggesting a resolution at this point; this is just fact-finding.

1. Were the 100 people told that they were being capped at 6% "because they were HCEs" and given an explanation of why "they were HCEs"?

2. Why don't you know exactly what percentage they would have contributed? I have the impression from your post that the 100 completed election forms specifying a %, but your recordkeeper capped them at 6%, thus their elections must have been for a % greater than 6%. Am I correct?

3. Are we talking about only 2007 and not any prior years? If it's only 2007, is it feasible to go to those 100 people who still work for the company and tell them about the mistake and give them the opportunity to make it up through the balance of the year? (This would stop the bleeding somewhat.)

4. Is there a Company match, and if so is it an annual match, or a pay period match with a true-up, or is it a pay period match without a true-up?

5. Does your recordkeeping admit responsibility, and/or has it notified its E&O insurance carrier?

[Guest fender5150]

Out of curiousity; Does your plan document restrict HCEs to 6%, or is this the estimated limit for 2007?

I was once with company of your size: We used to assign a limit to HCEs which usually ended up being 1 to 2%s lower than necessary.

Thanks,

Fender

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