No matching on Roth?

[ch1719]

Can a plan sponsor exclude Roth contributions when making the Safe Harbor matching contribution?

Our company recently started offering a Roth 401k in addition to the traditional 401k. I've been investing into the Roth 401k since January of this year. I finally looked back over the contributions, and saw that there has been no company matching on my contributions (should be matching 100% on first 4% of salary). Contacted payroll about this, and they responded: "You contribute to a ROTH account. There is no employer match on the ROTH accounts, only 401k contributions".

I looked over the plan documentation, and below is a summary of the safe harbor matching:

· You are allowed to defer a portion of your compensation to the Plan. These amounts are referred to as deferrals and are held in an account for you.

· You may make either Regular 401(k) deferrals (pre-tax) or Roth 401(k) deferrals (after-tax).

· In order to maintain "safe harbor" status, your Employer will make a safe harbor matching contribution equal to 100% of your salary deferrals that do not exceed 4% of your compensation.

[BG5150]

I would say they are doing it incorrectly, and owe you the match.

[ch1719]

I would say they are doing it incorrectly, and owe you the match.

I agree with you. Unfortunately, I haven't been able to find any documentation on Safe Harbor that supports or refutes this.

[Mr Bagwell]

Check the plan document. One we use says: If the Plan permits Roth Deferrals in addition to Pre-Tax Deferrals, Elective Deferrals for purpose of Section 3.05 (Safe Harbor 401k Contributions) includes both Roth Deferrals and Pre-Tax Deferrals.

[Belgarath]

If it isn't a "safe harbor" 401(k) plan, it is at least theoretically possible to do this, but it would require separate nondiscrimination testing under 1.401(a)(4)-4 for "benefits, rights, and features." Stupid, but possible.

If it is a "safe harbor" plan, then no dice, they can't do this. I would certainly raise the issue again, IN WRITING.

[ch1719]

If it isn't a "safe harbor" 401(k) plan, it is at least theoretically possible to do this, but it would require separate nondiscrimination testing under 1.401(a)(4)-4 for "benefits, rights, and features." Stupid, but possible.

If it is a "safe harbor" plan, then no dice, they can't do this. I would certainly raise the issue again, IN WRITING.

You wouldn't happen to have any documentation on this, would you? I feel like I would appear ignorant if I raised the issue without having anything to back it up. I'm certain the payroll department will just tell me I'm incorrect.

[Tom Poje]

1.401(k)-3(c )(2) refers to a safe harbor match equal to a % of "elective contributions"

there is no 'not including elective contributions that happen to be ROTH' in the Regs that I know of.

Code section 401(k)(12) has similar language.

I will go out on a limb and say that the payroll is treating the Roth as if it was an After Tax contribution, but that is a different animal

one website http://guidestone.org/retirement/aboutus/articles/RothVsAfter-Tax describes it this way:

How is this different than after-tax contributions which have been available in the past? Both Roth elective deferrals and after-tax contributions are similar in tax treatment initially and during the years before retirement. The primary difference involves tax treatment for withdrawals. At retirement, qualified distributions of Roth funds are tax-free whereas withdrawals of after-tax contributions will have taxes due on the earnings. Another difference involves liquidity — after-tax contributions are not subject to the same distribution restrictions as Roth elective deferrals (i.e., Roth elective deferrals are only available at death, disability, separation of service, attainment of age 59 ½ or hardship).

[My 2 cents]

I am not a lawyer, but speaking as a layman:

Plans must have procedures to allow participants to appeal benefit denials. I would consider a refusal to provide matching contributions for contributions that you feel should be matched to be a "benefit denial". Follow the plan's procedures for appealing benefit denials. They must provide you detailed information (including the specific plan provision or provisions on which they are basing their denial). After having gone through the appeals process (let's assume unsuccessfully), you would have their reasons in writing, which you can share with your legal advisor. If you and your legal advisor feel that the reasons are not correct or applicable, having gone through the appeals process, you would be at liberty, without fear of reprisal from the sponsor, to file a lawsuit against the plan seeking the matching contributions.

[Bird]

I'm certain the payroll department will just tell me I'm incorrect.

As the self-appointed "finder of the real problem" this may be your problem. Payroll departments, and payroll companies, routinely screw up retirement plan matters. They probably have something buried in their system that needs to be fixed - after they talk to someone who understands retirement plans.

[QDROphile]

My 2 Cents Is correct about the formal ERISA. claims procedure, described in the SPD, as the avenue for resolving the matter. Start with a formal written claim and you will get serious attention. If not, the fiduciary is in for a lot of trouble and payment of your legal fees if you ultimately go to court. I venture that if the plan screws up enough on its response to your formal claim, you can get a layer to take the court work on a con tangent fee for the lawyers' fee award.

[ch1719]

My 2 Cents Is correct about the formal ERISA. claims procedure, described in the SPD, as the avenue for resolving the matter. Start with a formal written claim and you will get serious attention. If not, the fiduciary is in for a lot of trouble and payment of your legal fees if you ultimately go to court. I venture that if the plan screws up enough on its response to your formal claim, you can get a layer to take the court work on a con tangent fee for the lawyers' fee award.

Taking my employer to court sounds like a quick and easy way to get me terminated...

[MoJo]

There is an "quasi-anonymous" DOL "tip line" that you can make a complaint on (on their website) - and when they contact your employer, they will not mention your name. If they do figure out it was you who filed the complaint and terminate you (for that reason), that would be a problem - an employer CAN NOT fire an employee for exercising their ERISA rights. Proving it, however, may be another matter....

[hr for me]

Agree with Bird -- Definitely seek out HR/Benefits before calling the DOL (that's a bit of a nuclear option at this point). Don't rely on the payroll department to give you a benefits answer. While payroll should know the plan features, it is very possible there was a miscommunication when Roth deferrals were set up and no one caught that match isn't being calculated.

Hopefully once you speak to HR/Benefits about it, you can get it fixed.

[My 2 cents]

My 2 Cents Is correct about the formal ERISA. claims procedure, described in the SPD, as the avenue for resolving the matter. Start with a formal written claim and you will get serious attention. If not, the fiduciary is in for a lot of trouble and payment of your legal fees if you ultimately go to court. I venture that if the plan screws up enough on its response to your formal claim, you can get a layer to take the court work on a con tangent fee for the lawyers' fee award.

Taking my employer to court sounds like a quick and easy way to get me terminated...

Isn't filing a lawsuit seeking rights under an ERISA plan a protected activity? Any retaliation against you (not just termination) would be grounds for further damages (probably substantially bigger than the damages you would have sought in your first suit).