What to do when employer failed to make requested in 401K?

Question

I have a non matching 401K through my company and I made a request at the end of last year to have my contributions increased from 2% to 5% however my employer failed to do this. So now it is months (and months) later my contributions have remained the same as they were last year and frankly I am ticked. The paperwork which I submitted clearly states that I requested the increase (yes, I have a copy of it) so does anyone have any suggestions? I mean do they have any responsibility in this or do I just ask them to make the correction immediately and forget about it? Any help would be appreciated because I know nothing about this stuff (obviously!).

Answer 1

Well one positive is that the market is down around 14% so far this year so you probably saved money by not investing.  But a mistake is a mistake and over the long-run you will probably be better that the money was put into the 401k plan.  Now if they redo payroll your going to have to come up with the extra 3% per paycheck to put into the 401k.  Do you have that money available?  They should be able to work with the Third party adminstrator and custodian to put the money into the account because an error was made.  You can either call ERISA or the labor department.  But if you dont have the funds to put into the 401k don't bother.

Answer 2

Part of this depends on the size of your employer.  As an administrator of a relatively small plan, sometimes the computer programs they make you use do not allow for any mistake correction.  For instance, if they neglected to make your payroll change by date X, the program simply won't allow them to make the change.  In a case like this, where you made a timely request, they should simply get it fixed moving forward.  I don't see how they can retroactively change this.  Since there is no match, it probably isn't a huge deal (although irritating).  If the employer is making timely deposits of their 401K withholding, I doubt DOL would really be much help, but your employer should do more.

Answer 3

Absolutely not...you shouldn't forget about it.  Although you should have said something to them months and months ago (like no later than 1 month after the contributions should have increased).

the remedy requires your employer to make a corrective contribution of 50% of the missed deferral (adjusted for earnings) on your behalf.  You are fully vested in those contributions, which are subject to the same withdrawal restrictions that apply to elective deferrals.

So what you do is give a copy of your form requesting the increase and a copy of the attached page from the IRS website to your company.  This doesn't mean they'll do it, as they can always claim that you never submitted the form but it's the first step.   If they refuse to make the contribution then you have to decide if you want to persue it further which would mean involving the Department of Labor which of course would tick off your employer and possibly make your life miserable.