401(k) Catch Up without Permission

[dandari]

What is the name of your state? Pennsylvania

Hello,

I recently became eligible for my 401(k) program on July 1. We had our meeting on July 1, I signed up and paperwork was processed and ready to go by this weeks (July 19) pay period.

I authorized 9% to be taken out per pay period. The CEO made a decision to "catch everyone up", so they have taken out 18% from my pay. I expressly told three senior managers that this was not acceptable and I did not want this to happen. They did it anyway.

Do I have recourse?

Thanks,
Dandari

 

[Beth3]

No. You made a legal committment to defer X% of your annual salary into the 401(k) Plan for the balance of 2004. Your employer is obligated to make that deduction and under the terms of a 401(k) Plan, you can't change the amount you agreed to defer until the next open enrollment period.

Your employer had no option but to make a "catch up" deduction. Their failure to do so would have violated federal regulations.

Now what your employer should have done was to have the enrollment meetings in sufficient time prior to July 1 so that this wasn't necessary but they didn't violate any laws.

 

[dandari]

Hi Beth,

Thanks. Still one question. Even though I specifically authorized only 9% per pay period, he can deduct more for past periods?

 

[Beth3]

This isn't a "per pay period" situation. You committed to deferring 9% of your salary for the balance of the year. If a pay period is missed for some reason, your employer cannot just look the other way. You are making tax-deferred salary deferrals into a qualified retirement plan which is heavily regulated by federal law. The only time a payroll deduction equivalent to 9% of your annual salary need not be make is if you earn no wages AT ALL in a particular pay period, and that's because your annual salary would be less that amount of wages.

For example, if you will earn $30,000 for the period of July 1 through Dec 31st, you must contribute 9% of that salary ($2,700) into the 401(k) Plan by year-end. Unfortunately, due to your employer's administrative untimeliness, they had to make an 18% deduction in one pay period in order for you to meet the legal obligation you made.