Was participant really enrolled?

[coleboy]

An employee that was eligible for the plan sends the employer a note stating that she wants to start having $20 deducted from her pay for the 401k plan. He never givers her an enrollment form to complete.He sets up the deduction on payroll. The first deduction went into the plan. After that, for some reason, the deductions got stopped on the payroll system.

Now she has terminated her employment and wants to take her money out. Her account balance shows $20. She thinks that she has at least $400 because she thinks the $20 had been coming out of her account each week. There's a $75 processing fee so she can't even get her $20 out.

What can/should be done?

[ETA Consulting LLC]

This is where it helps to have established procedures in place when administering plans.  It is incumbent on the Plan Administrator to have those in place for this and many other circumstances.  When a person becomes eligible, what is the procedure they must follow when communicating their deferral elections?  Do you require them to complete a standard form?  Or, do you accept their elections by email?  Better yet, do you permit them to write their elections on a paper towel and submit them to you?  There is no law on the form of communication, but the Plan Administrator is responsible for having those procedures in place to ensure the Participants' rights are being enforced.

Your question is whether or not the election to have $20 deducted from her pay was a bona fide election that could be acted on by the Plan Administrator.  It appears as if the Plan Administrator first decided that it, in fact, was a valid election, but later changed their position.  Nonetheless, the proper procedure for enrolling must be communicated. At this point, what you feel must be done would depend on whether or not you see a failure in the way the plan was administered with respect to allowing participants to elect to defer.

Good Luck!