What if participant wants backup on ADP refund?

[BG5150]

Thought just came to me:  what if a participant is questioning his ADP refund?  

What if he says to the employer:  prove to me my refund is correct.

What do they do?

[Mike Preston]

Is nicely as possible, tell them to go fly a kite.

[shERPA]

4 hours ago, Mike Preston said:

Is nicely as possible, tell them to go fly a kite.

But only if that’s what the plan document says to do.

[Mike Preston]

7 hours ago, shERPA said:

But only if that’s what the plan document says to do.

Sorry about the typo (As versus Is).

Seriously, though, I have never seen a document address the issue one way or the other.

[shERPA]

3 hours ago, Mike Preston said:

Sorry about the typo (As versus Is).

Seriously, though, I have never seen a document address the issue one way or the other.

That's a joke, I say, that's a joke, son!  I’ve never seen a document include language suggesting a participant go fly a kite either.  Although it might have been fun to slip it into one BITD when we did individual DL submissions, just to see if it got thru.   

[MoJo]

If I were the employer, I'd tell them that the reason they are getting a refund is because they are getting paid a LOT - and to start behaving like someone worth that much money.

[BG5150]

15 minutes ago, MoJo said:

If I were the employer, I'd tell them that the reason they are getting a refund is because they are getting paid a LOT - and to start behaving like someone worth that much money.

I doubt that would be a productive conversation.  Are you going to tell a COO you are paying her "a lot" and not to worry about the specifics of her refund.  "Just trust us, it's correct."

Every other payment out of a plan can be quantified to the participant that I can think of.  Except ADP/ACP failures.

[Bri]

And the thing is, in a smallish company, you can't just hide the names/SSNs and show the math of the test to the person.  They're gonna know who's who.  Is the COO going to ask the IRS to audit the plan? 

 

"We could provide a QNEC instead, but it's reducing your bonus."

[MoJo]

6 minutes ago, BG5150 said:

I doubt that would be a productive conversation.  Are you going to tell a COO you are paying her "a lot" and not to worry about the specifics of her refund.  "Just trust us, it's correct."

Every other payment out of a plan can be quantified to the participant that I can think of.  Except ADP/ACP failures.

I'm saying companies pay people for being smart.  Figure it out.  Ask specific questions other than "prove it."  LEARN SOMETHING.  Ask what the test results were.  Try to calculate it yourself.  Even then, even if its a $10,000 refund - don't spend a heck of a lot of time on iit - being unproductive while I'm paying you six figures.  And then, suggest to the plan sponsor alternative plan designs (safe harbor), or putting a cap on HCE deferrals (which a smart person should have thought about as well before deferrals).

Just saying - be productive rather than being whiny.....

[BG5150]

Often, smart people try to be smart with their money.  ADP refunds affect taxes.

And the people may be okay with the refunds, they would just like to know how that figure is derived.

And, who's to say I'm worried about this during work hours?

And, even if she knew how the test worked, she would need to be privy to the calculations which include people's compensation and their deferral amounts, which are generally not public knowledge, even to all HCEs, of a company.

[Belgarath]

38 minutes ago, BG5150 said:

And, even if she knew how the test worked, she would need to be privy to the calculations which include people's compensation and their deferral amounts, which are generally not public knowledge, even to all HCEs, of a company.

And to me, that's really the issue. This is what you'd use to politely, as Mike said, tell them to go fly a kite, in most situations.

[MoJo]

2 hours ago, BG5150 said:

Often, smart people try to be smart with their money.  ADP refunds affect taxes.

And the people may be okay with the refunds, they would just like to know how that figure is derived.

And, who's to say I'm worried about this during work hours?

And, even if she knew how the test worked, she would need to be privy to the calculations which include people's compensation and their deferral amounts, which are generally not public knowledge, even to all HCEs, of a company.

You're getting ridiculously nit-picky.  They don't need detailed results and I'd tell them that.  It's irrelevant that there are tax consequences to them.  Life is full of tax consequences.  Give them the adp/acp test ratios, and a phone number for Congress.  Whiny HCE's  should/need to focus on big pictures and the piddly tax consequences of a refund show me they are lacking in common sense.  A simple explanation and tell them to get back to work is all I'd give them (and if they push, I would remember the conversation next time they are up for a raise).

[jsample]

I agree with the comments, but sometimes HCEs are generally confused, especially if they bounce from HCE to NHCE.  We have plans with sales people who earn high commissions one year and none the following year.  One year they earn enough to become an HCE, based on prior years wages.  They keep contributing their 15% and in the HCE year they get a large refund the following year, when they fall out of HCE status.  Granted, "it is what it is", and you cannot show the testing calculations to affected individuals, but in rare cases I could understand an employee asking. 

[Lou S.]

IRS testings rules limited the deferrals of HCE like you in your Plan to $X. You deferred $Y. You are receiving a refund of $Y-X. IRS requires earnings to be allocated to refunds. Your earnings were Z%. The earnings on your refund is (Y-X) * Z.