Roth Salary Deferral Instructions Not Followed

[BeanCounterBlues]

Assume an immaterial number of plan participants elected in writing to have their deferrals be Roth post tax instead of pre tax. The plan was amended timely to permit Roth deferrals.

Employer inadvertently set up a few participant's elections in the payroll system as pre tax when in fact s/h/b set up as Roth.

Most affected participants have terminated and removed their funds (this happened back in 2006). Not sure that makes any difference.

Assume the W-2 was prepared according to the payroll system - eg those participants that elected Roth, but didn't have Roth applied by the employer, did have a W-2 w/ a reduction in box one for the pre tax deferral (that was supposed to be Roth).

Assume that none of these participants ever noticed this error. Or if they did notice it they chose not to say anything. Again realize that doesn't matter but want to present all facts.

Is the answer different if instead of Roth not being followed - the plan sponsor inadvertently set up payroll to withhold as Roth when in fact the salary deferral s/h/b set up as pre tax. Again assume W-2 reflects what the payroll system actually did.

What correction would be recommended under the circumstances? If any cites available would be appreciated.

Happy to do any research (if anyone can point me in the right direction) just not having any luck finding anything. Thanks for any help.

[Bird]

Unless you have a time machine, it's not really fixable in any remotely practical way. And nobody affected seems to care. I would just turn the page.

[BeanCounterBlues]

Bird:

Thank you for your kind response. I don't disagree w/ you. However the Plan's auditor (>100 lives) is insisting this be fixed and if Plan sponsor chooses not to fix it auditor wants a cite for the position. Any further thoughts? I left the auditor issue out of the original post hoping someone on the boards would have run into this in the past and had suggested fix. Thank you again.

[Bird]

"...the Plan's auditor (>100 lives)..."

Oh. Sorry, I don't have any cites either way. Not sure what to tell you, but maybe the auditor would be content to just write a scolding cavat of some kind? It really is just impossible to fix.