Payroll deduction error

[MoShawn]

Have a client that discovered 4 payrolls into the year that 401(k) deductions were being made for several employees who had elected to stop contributing effective 1/1/10.

We suggested correcting the payroll system on its own, forfeiting incorrect amounts that were deposited, and using forfeitures to offset future contributions (yes, plan permits).

Client now wants to know if they can have that money back, since it was a payroll error. I haven't been able to find anything that would allow this, so any insight would be appreciated.

[K2retire]

I don't think you will find anything. If it is considered a "Mistake in Fact" it can come out of the plan. Unfortunately, there doesn't appear to be a good comprehensive definition of what constitutes a Mistake in Fact. Genearlly typographical errors or duplicate deposits are pretty safe bets, beyond that, it's not so clear.

[BG5150]

Does EPCRS have the remedy?

I couldn't find it, but that doesn't mean it isn't there...

[MoShawn]

The only thing I could see was to self-correct by forfeiting what was erroneously deposited. I couldn't find anything about sending that money back to the employer.

[Peter Gulia]

Has the employer already paid the late wages (at least the amount of the unauthorized wage reductions) to the affected employees?

[MoShawn]

They are currently discussing with their accountant how to go about doing this.

[BG5150]

They are currently discussing with their accountant how to go about doing this.

I don't think an accountant (well, most of them, anyway), would be the best person to ask about how to fix a qualified plan.

I seem to remember that you can distribute the erroneous elective deferrals directly to the participants, but can't seem to find it in EPCRS at the moment...

[MoShawn]

Oh, not correcting the plan, but the payroll. My comment was to the immediately preceding post. Sorry.