401k Safe Harbor Contribution & Compensation

[Guest chell4568]

Hello;

My employer has a Safe Harbor 401k plan with a 3% non-elective contribution made to all employees each year. After having been under this plan for a many years, I've recently noticed that the contribution is based on the value in box 1 of the W2 form. This value is amount I earned for the year less the contributions I made to the plan. Is this an error on the employer's part? Put another way, suppose I made $10k in a year and put $3k into the 401k. This leaves $7k. Should the employer make the non-elective contribution as 3% of $10,000 or 3% of $7,000?

If the employer is making a mistake in how they are determining the non-elective contribution, how can I prove it? Are there IRS regulations that I can point to? And how do I go about getting any money owed (plus earnings on that money)?

Also this plan has been in existence for over 10 years, has the rules about this 3% non-elective contribution? If so when?

Thank you for any assistance...

Sincerely;

Michelle

[Lou S.]

Maybe, maybe not. Read your Summary Plan Description (SPD) on the definition of compensation. The employer is allowed to use either but it needs to be in the Plan document.

[ETA Consulting LLC]

I agree. It may be an accident on their part. If so, it's one that they will have to correct. But, as Lou S. stated, the SPD will be specific as to the definition of Plan Compensation used. You'd look for language to say "your taxable wages or salary, 'INCLUDING PRE-TAX DEFERRALS YOU MAKE OR ANY OTHER PRE-TAX". This is the language that would suggest that the pre-tax amounts will be added back to the 'taxable wages'.

Good Luck!

[Guest chell4568]

Thank you everyone for replying. It looks like I'll have to make a visit to the office to get a look at Summary Plan Description.

Sincerely;

Michelle