Suspended Contributions

[MBCarey]

A plan we have uses "self-service" with their payroll company to allow participants to manage their deferral percentage elections,. One of the participants requested a suspension of his deferrals on 11/30/2010 and he just realized that they did not stop. Is the employer obligated to refund these deferrals to the particpant. A confirm is not issued to the particpant when they do this. It would seem to me that that it is to late to refund 2010 but what about the 2011?

[QDROphile]

What if the plan said something to the effect that contributions to the plan on account of elective deferrals shall be in accordance with participant elections? Would that mean the plan failed to operate in accordance with its terms and had an operational failure that would need correction under EPCRS?

Make sure you take into account that there was a payroll failure. The employer underpaid the employee if the employee's pay was supposed to be determined in accordance with elections.

[MBCarey]

What if the plan said something to the effect that contributions to the plan on account of elective deferrals shall be in accordance with participant elections? Would that mean the plan failed to operate in accordance with its terms and had an operational failure that would need correction under EPCRS?

Make sure you take into account that there was a payroll failure. The employer underpaid the employee if the employee's pay was supposed to be determined in accordance with elections.

Its late in the day so forgive me for being "dense". Are you telling me that we need to correct this under EPCRS calculating and removing gains as well.

And yes, I guess the employer did underpay the employee. I am not sure what year the underpayment for 2010 would be taxable. Sorry to be so dense.

[QDROphile]

I am suggesting one way to look at the circumstances and alerting you to some elements that need to be reconciled. To the extent possible, mistakes should be corrected in line with applicable guidance.