Deferral election forms

[Guest Lil Anderson]

Does anyone know if there are penalties for not keeping participant deferral election forms? If a participant originally elects to defer 10% of their salary, for example, and then changes to 1% (completes a new form and gives it to his employer), but the employer does not keep the new form, even if the change went into effect?

I have a 401(k) plan that is audited each year. In reviewing the personnel files, the amount on the election/enrollment form is not the same as what is being withheld per payroll. Potential penalties?

thank you

[rcline46]

Do you keep copies of their last W-9? Cafeteria election forms? Other signed forms relating to payroll?

A deferral election is no less important and needs to be treated the same as all other forms. Even forms where they elected -0- withholding. The penalty would be forced company contributions to those employees because you cannot prove their elections changed.