The Case of the Missing 401(k) Contribution
April 27, 2016 3:46 PM Subscribe
The lovely Ms. Quizicalcoatl recently changed jobs and rolled over her 401(k) into an IRA with a different firm. Awesome! Then, she got a final vacation payout check from her former employer...but her pre-tax contribution was withheld from that payout. The money never showed up in her 401(k). Where did that money go and how do we get it back?
There are also complicating factors. There are always complicating factors...
She left in mid-March. We thought her paychecks were delayed so that the monthly check represented the prior month's work (e.g., we thought the March check covered February), but we were wrong. That's why we didn't catch that they'd overpayed her and why we were skeptical when they asked her to pay back about 60% of her net pay they'd auto-deposited in March.
The whole overpayment thing wasn't brought to our attention until mid-April, when we got a check for her vacation payout in the mail, along with a letter asking that we pay back the overage from the last month's paycheck.
In the course of finding out that we did, indeed, owe them the overpayment, we deposited the vacation payout check (paper check, not direct deposit). Her employer's check bounced (saddling us with the $20 bank fee for a cancelled check, btw), which led us to look ever deeper into the matter. That's when we saw that the paystub for the vacation payout indicated that money had been withheld for her pre-tax retirement contribution - to the 401(k) account that has already been rolled over.
At this point, it seems like the best way to proceed is for us to get the payroll office to completely redo the vacation payout without withholding the retirement contribution, send us that check, not bounce it(!), and let us put that money towards repaying the overage from March.
Is that plan feasible? If not, what would you not-my-lawyers/not-my-accountants recommend? We're in MA if that makes a legal difference. Just to state it clearly: we're not interested in trying to avoid repaying the overage, we just don't trust the payroll office to handle it correctly (or professionally given their dealings with us so far).
There are also complicating factors. There are always complicating factors...
She left in mid-March. We thought her paychecks were delayed so that the monthly check represented the prior month's work (e.g., we thought the March check covered February), but we were wrong. That's why we didn't catch that they'd overpayed her and why we were skeptical when they asked her to pay back about 60% of her net pay they'd auto-deposited in March.
The whole overpayment thing wasn't brought to our attention until mid-April, when we got a check for her vacation payout in the mail, along with a letter asking that we pay back the overage from the last month's paycheck.
In the course of finding out that we did, indeed, owe them the overpayment, we deposited the vacation payout check (paper check, not direct deposit). Her employer's check bounced (saddling us with the $20 bank fee for a cancelled check, btw), which led us to look ever deeper into the matter. That's when we saw that the paystub for the vacation payout indicated that money had been withheld for her pre-tax retirement contribution - to the 401(k) account that has already been rolled over.
At this point, it seems like the best way to proceed is for us to get the payroll office to completely redo the vacation payout without withholding the retirement contribution, send us that check, not bounce it(!), and let us put that money towards repaying the overage from March.
Is that plan feasible? If not, what would you not-my-lawyers/not-my-accountants recommend? We're in MA if that makes a legal difference. Just to state it clearly: we're not interested in trying to avoid repaying the overage, we just don't trust the payroll office to handle it correctly (or professionally given their dealings with us so far).
There will be a plan administrator, typically someone in the HR / Benefits / Finance department of her old company, who should be able to help explain. The money was probably credited to her old 401(k) account after the balance was rolled over, I imagine, and is still sitting there.
Or could it be that the rolled over balance already included the 401(k) contribution from her vacation check?
Can she check her online statements to verify? Also, 401(k)s are usually administered by third parties like Fidelity or T Rowe price which should have call in numbers... they should also be able to shed some light on this.
Companies with large 401(k)s (more than 100 participants) are audited every year and have to be able to show that what they withheld from participants' paychecks for 401(k) contribution were actually credited to their specific 401(k) accounts.
posted by watrlily at 6:26 PM on April 27, 2016 [1 favorite]
Or could it be that the rolled over balance already included the 401(k) contribution from her vacation check?
Can she check her online statements to verify? Also, 401(k)s are usually administered by third parties like Fidelity or T Rowe price which should have call in numbers... they should also be able to shed some light on this.
Companies with large 401(k)s (more than 100 participants) are audited every year and have to be able to show that what they withheld from participants' paychecks for 401(k) contribution were actually credited to their specific 401(k) accounts.
posted by watrlily at 6:26 PM on April 27, 2016 [1 favorite]
Response by poster: Thanks for the answers. In this case, we were able to log onto the old Fidelity account and see that it hadn't been deposited either before or after she rolled it over. I can only guess that the check was returned or that it has yet to be distrubuted.
The company is definitely large enough to be audited if the cut off is 100 participants. They have over 10,000 employees.
posted by Quizicalcoatl at 4:02 AM on April 28, 2016
The company is definitely large enough to be audited if the cut off is 100 participants. They have over 10,000 employees.
posted by Quizicalcoatl at 4:02 AM on April 28, 2016
Over ten thousand employees and the cheque bounced? Yeesh. That's concerning. Their weekly/monthly payroll will be huge, one person's unused vacation pay shouldn't be scraping against the bottom of the barrel.
I would sit down with someone who knows what they are doing so it can be calculated out properly and you pay the difference between the overpayment and the days owed to you. The way they are going you'll end up paying the overpayment back and they'll mess you around with the amount they owe you and their ineptitude will cost you ever increasing hassle. I'd escalate it through HR/payroll first, there's got to be someone who knows what they are doing. If you get an accountant you'll likely end up paying for it yourself, I doubt they'd share that cost unless it escalated to legal action and I've no idea about that.
(I can't get over the cheque bouncing. For a tiny business, OK, cash flow can be tight. But an employer of ten thousand people bouncing a fairly small cheque, that's appalling. I've done payroll and I've never worried that there wasn't enough in the bank to pay people!)
posted by kitten magic at 5:30 AM on April 28, 2016
I would sit down with someone who knows what they are doing so it can be calculated out properly and you pay the difference between the overpayment and the days owed to you. The way they are going you'll end up paying the overpayment back and they'll mess you around with the amount they owe you and their ineptitude will cost you ever increasing hassle. I'd escalate it through HR/payroll first, there's got to be someone who knows what they are doing. If you get an accountant you'll likely end up paying for it yourself, I doubt they'd share that cost unless it escalated to legal action and I've no idea about that.
(I can't get over the cheque bouncing. For a tiny business, OK, cash flow can be tight. But an employer of ten thousand people bouncing a fairly small cheque, that's appalling. I've done payroll and I've never worried that there wasn't enough in the bank to pay people!)
posted by kitten magic at 5:30 AM on April 28, 2016
Response by poster: I wonder if I'm using the term "bounce" incorrectly here. My guess is that the check didn't bounce because of a lack of funds. Rather, I suspect that it they stopped payment on it thinking that that was a reasonable way of guaranteeing the return of a portion of the overpayment. I pride myself on my integrity (if not my humility) and would never attempt to avoid paying the overage back (although I did want to understand the situation first), so it struck me as an unnecessarily aggressive move on their part. Either way, the whole situation seems to have been handled ad hoc and it's quite frustrating. The frustration is doubled because it's dealing with more money than I can easily absorb, but not enough money that hiring a lawyer wouldn't end up costing more than the matter at hand.
posted by Quizicalcoatl at 6:12 AM on April 28, 2016
posted by Quizicalcoatl at 6:12 AM on April 28, 2016
I manage the payroll and retirement accounts for a MUCH smaller company, but I will add the following:
1. Putting a stop payment on an incorrectly processed check is standard procedure and I wouldn't take it personally. I'm not saying they aren't jerks, but this isn't necessarily an indication of such.
2. Taking retirement funds out of the vacation check was probably done automatically (a mistake but not a malicious one), and I think if you call and explain what happened, you should be able to work out a way to exchange only the difference between what you owe and what they owe. This is their mistake and when you bring it to their attention (I don't think you have yet?), then they should have no problem fixing it.
posted by Glinn at 5:05 PM on April 28, 2016
1. Putting a stop payment on an incorrectly processed check is standard procedure and I wouldn't take it personally. I'm not saying they aren't jerks, but this isn't necessarily an indication of such.
2. Taking retirement funds out of the vacation check was probably done automatically (a mistake but not a malicious one), and I think if you call and explain what happened, you should be able to work out a way to exchange only the difference between what you owe and what they owe. This is their mistake and when you bring it to their attention (I don't think you have yet?), then they should have no problem fixing it.
posted by Glinn at 5:05 PM on April 28, 2016
Response by poster: Thanks, Glinn. In this case, the check they stopped payment on wasn't the one they were aware was incorrectly processed (that was deposited directly), although I now believe it wasn't processed correctly because of the retirement funds issue. Good to get some understanding of the situation from a payroll professional though.
posted by Quizicalcoatl at 10:03 AM on April 29, 2016
posted by Quizicalcoatl at 10:03 AM on April 29, 2016
This thread is closed to new comments.
posted by saucysault at 4:26 PM on April 27, 2016