My employer has failed to deduct from my paycheck a requested retirement plan increased contribution for >2 months now. The increased amount is about $120 per month. As soon as I became eligible for this increase, I requested it. Plan documents specify that, once you’re eligible and request the increase, it will be deducted from the paycheck in the pay period after you make the request. We have 2 retirement plans – one for money that gets the employer’s match, and one which is optional.
To make a long story short, I kept contacting the employer at least weekly, mostly in writing (5 emails, each 6-8 days apart) and once by phone (>20 min hold times at the Benefits office, so I tried to avoid this option). I got at best vague replies to only 3 emails (they were "investigating", with no explanation of what the problem was or when it would get fixed.
This past weekend, I finally wrote a letter, elevating the matter above the director of the unit and copying the director herself.
I finally heard from the director Monday. She said the problem was due to a software error from a new payroll system implemented early in the summer. Apparently, I was the first (and perhaps only!) person to notice the problem, and the delay in getting me answers had to do with them trying to figure out where the error was coming from. The direct said they were following IRS correction processes which were as follows (this is what I want to verify):
- For the pay periods the employer failed to take my contribution from my paycheck, I will not be able to make that contribution. The employer says the IRS does not allow the employer to take my contributions retroactively
- The employer will retroactively make their contribution back to the pay period in which it should have started, under plan documents (the match to what I would have made).
- As a “penalty”, the IRS requires that the employer make an additional contribution that totals 50% of the contribution I would have made, had the employer honored my request.
I’m being told by my employer that the only thing I can do to make up this gap is to contribute more to my supplemental retirement plan. As long as I do this, I can make the contributions equal what would have been made without the employer error.
The director said she would check with payroll to see whether they could guarantee that the increased contribution – the one I requested > 2 months ago – would finally show up on my Nov 10 paycheck. I did finally receive confirmation that would happen – the interesting thing will be whether it will happen.
The director emphasized that the above was what the lawyers said had to be done.
In the end, if everything occurs according to the above, I will get the contributions I planned. I have lost 4-5 hours trying to resolve this situation. When I asked about compensation there, of course, nothing was forthcoming, nor is there any compensation for all t he stress this caused.
Thanks in advance!