Failure to Withhold Elected Deferral

[oriecat]

Employee elected 15% in January 2009. This somehow didn't get printed in the payroll office and the employee never mentioned that his deferrals never started. This comes to light in May when he is talking to the financial advisor and his account balance is zero.

We are being advised that the proper corrective action is to fund his account with 50% of the deferrals that should have occurred and 100% of the missing match, adjusted for any growth. Is this correct? I thought I read something about missed deferrals being at the average rate of the ADP test or something like that, but it's very likely that I misunderstood or that that is for something else.

Thank you.

[Jim Chad]

I believe the information you are getting is correct.

The "average from the ADP test" is used when someone was not informed of eligibility and signed no form.

[oriecat]

Great. Thank you, Jim.

[401 Chaos]

Nice windfall for somebody that is apparently making so much that they don't notice the lack of a 15% deduction from their paycheck for almost 1.5 years, huh?

[oriecat]

Actually he's an immigrant making about $10 an hour and I don't think he ever looks at his paystubs, as he probably can't read them.

[401 Chaos]

OK, that makes it seem a little better I suppose--and hopefully less expensive for the employer to correct. When we've had clear history of the deferral election percentage that was desired, I think we have always historically corrected by providing the full amount as well.

[oriecat]

Yeah, it should only be about $3k to correct, I think. Definitely not happy it happened, but could have been much worse. And if we're gonna give anybody free money, might as well be someone like him, instead of a highly paid salesman or something who would have known to say something.