Administrative Error - Excess Withholdings

[401king]

A pretty big mistake caused a payroll clerk to "withhold" and contribute nearly 4-8 pay periods worth of deferrals for a participant in a single pay period. Deferral agreement indicates somewhere in the area of 25% per pay period. So, this participant didn't even receive a paycheck for that period, and now they are reducing the next few paychecks to make up for the amount they withheld over the period compensation.

Not only that, this withholding took place about 6 weeks (or 20%) ago. The issue was brought to the attention of the payroll administrator promptly, who said there was nothing she could do.

It is my understanding that the company who made the error (sponsor) is liable for the losses of the deferrals made in error; they are saying otherwise. My next step is to get the DOL (as the sponsor is not being very easy to work with) involved but I would like some feedback in case anyone has handled this situation before.

[QDROphile]

Who are you to involve the DOL and why?

[401king]

The participant lost a substantial amount of money due to this error; money that should not have been lost.

I would think that if the sponsor is taking no action in resolving the problem, and that the deferrals did not follow the deferral contract, then the only resource left would be the DOL. It is my understanding that the DOL is the agency that resolves issues regarding retirement plans. Is that incorrect? Who else should I be thinking of going to for this type of situation?

[QDROphile]

What is your role with respect to the plan or the participant? Are you a fiduciary?

[401king]

Personal relationship. This is something that I've never had to deal with personally; she is getting no assistance from her company, though, and I am trying to assist in helping her resolve the situation (if there is any resolution).

[Bill Presson]

This whole thing seems very odd to me. The person receives no paycheck, complains and the sponsor says sorry?

I have never worked for or with any sponsor that wouldn't immediately act to correct the issue.

I'm leaning towards calling BS on this one.

[QDROphile]

In that case, the threat, and going through with the threat, of appeal to the Department of Labor is a legitimate tool. But don't use the toool too soon. The participant should get started immediately with a formal claim under the plan's claims procedure. That formality should get some attention from the fiduciary, who may be just hoping the issue will go away. I take you at your word that informal inquiry and protestation have not received reasonable response.

The situation also sounds like it involved a failure to follow plan terms, which would disqualify the plan, so the threat of going to the IRS to report potential plan disqualification is a possibility. That option is a bit more self destructive, but it will touch a nerve with the plan sponsor and management as well as the plan administrator.

[401king]

...The participant should get started immediately with a formal claim under the plan's claims procedure. That formality should get some attention from the fiduciary, who may be just hoping the issue will go away.

...That option is a bit more self destructive, but it will touch a nerve with the plan sponsor and management as well as the plan administrator.

Thanks, QDRO. I understand your skepticism, and was surprised myself when I heard about it. There's a good chance I don't have all of the details, but I think I/you have the gist of it.