Deferrals not stopped on terminated employee

[JKW]

A participant was terminated but they administrator continued to send in two payroll deposits that were not actually deducted from the participant since they did not have a check. So there is about $120 in employee deferral and 120 in safe harbor match that the participant was not eligible for. Whats the best way to correct this? It all happened in 2013.

Thanks.

[Kevin C]

When you are dealing with deferral and match deposit errors, timing can make a big difference. What were the pay dates for the deposit errors?

Here is a recent discussion about an extra deposit made by mistake.

http://benefitslink.com/boards/index.php?/topic/52655-mistake-or-not

[MWeddell]

It sounds to me that what happened to the participant's paycheck is correct. The error is that money was deposted that shouldn't have been. The deposited money, adjusted for earnings, should be treated as forfeitures.

[BG5150]

It sounds to me that what happened to the participant's paycheck is correct. The error is that money was deposted that shouldn't have been. The deposited money, adjusted for earnings, should be treated as forfeitures.

...and be used to offset future contributions and NOT used toward fees.

[masteff]

that were not actually deducted from the participant since they did not have a check

If they really did not have a check, then as said above, it was an error.

But if they did have a check, which is possible with things like final pay and unused vacation, then the check and the deferral might be valid. You didn't specify the time difference between the term date and the date of the deferral.

You might read thru the following thread:

http://benefitslink.com/boards/index.php?/topic/39452-payroll-period-crosses-plan-years-participant-terms-mid-pay-period/

[BG5150]

Could this be considered a Mistake of Fact and the funds sent back to the company?

I'd prefer the money stay in the trust and the ER just short the next wire by the amount "forfeited." Actually saves a step, and it's a zero sum game in the end.

[JKW]

Thanks all for the information. Very Helpful.