Roth deferral

[Belgarath]

Plan that permits Roth deferrals, for reasons unknown, didn't withhold the money from the employee's paycheck. Employee then submitted the appropriate amount by personal check, which was deposited to the plan. This happened in 2010. This is also a plan large enough so that it will require an audit.

Anyone ever encountered this? This should qualify for SCP. But what's the fix? Refunding the money to the employee, then having the employer submit the same amount, then having the employer withhold extra from next paycheck to make it back to the same place? This seems ridiculous, as the employee is paying tax one way or the other, and the W-2 will show full taxable income. So although "no harm no foul" - how would you handle such a situation?

[ETA Consulting LLC]

You know that you cannot defer from funds that have already been received. So, Roth or Regular, writing the check should be unacceptable. You may be left with determining the protocol for failing to meet the Participant's elections, but you wouldn't want to make a bad situation worse.

Good Luck!

[Belgarath]

I understand there's a fix under Appendix A, .05, and Appendix B, example 12, of Revenue Procedure 2008-50. I just wondered if anyone else had encountered this and come up with a different alternative.

Thanks for your response!

[Belgarath]

Wow, scrap all of this! As soon as you start looking into something, they come back and give you different information. What happened, in fact, is (as of now, until they change the story again) that the Head Honcho signed an election form deferring 0 (Zero.) Then he just sent in a check for his full deferral amount.

Sheesh.

As an academic exercise, without going back and re-reading it, I'm not sure the Example 12 in appendix B is an appropriate example. I'm not sure it covers Roth deferrals.