Over-Vested - Paid out too much Employer Match to Employee

[KTB]

Does anyone have any insight on paying too much out to an employee as far as the employer match goes?

For instance, when we verified hours of service with a company that we just took over, we were informed of 5 years of service with over 1000 hours, indicating in this plan that the employee would be 80% vested. However, when needing to dig down for actual hours during an audit, we were informed that the employee should have only had 4 years of service, indicating 60% vested. The dollar amount difference is only $50 between the 80% and 60%. I could see an issue if it was the other way around where the participant got shorted. But in this case, the employer paid out too much so it really only affects the employer, not the participant. Does anyone have any thoughts or documentation on how 'severe' this over-vesting payout really is?

[Lou S.]

We the real answer is the trustee is supposed to make every reasonable effort to recover the over payment.

The reality is the amount involved is so small that it would probably cost more to recover it than any potential recovery.

I'd probably send a letter to the participant requesting a return of the over payment and keep that in the file. But I would probably not followup to hard when the participant files that letter in his/her circular file.

[austin3515]

On principal I would not do anything. Sometimes I think people just need to take a deep breath and ask "is this really a big deal"? We leave small over-deposits in peoples accounts fairly often (Johnny was over-deposited by $8, etc.). If they're underpaid that is different, we usually correct all under-payments. But tiny little overpayments?

[ESOP Guy]

If the plan reallocates forf I would think about having the employer making plan whole so no one can say the other people in the plan were harmed.

[chc93]

EPCRS (RP 2013-12) Section 6.02(5)( c )...

( c ) Recovery of small Overpayments. Generally, if the total amount of an Overpayment to a participant or beneficiary is $100 or less, the Plan Sponsor is not required to seek the return of the Overpayment from the participant or beneficiary. The Plan Sponsor is not required to notify the participant or beneficiary that the Overpayment is not eligible for favorable tax treatment accorded to distributions from the plan (and, specifically, is not eligible for tax-free rollover).

[KTB]

Thank you for all of your comments! I agree with the amount being so small, the time and effort of recovering would exceed that. I appreciate the EPCRS siting.