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Opinions re missing 401k deposit
Old 07-22-2012, 05:02 PM   #1
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Opinions re missing 401k deposit

Greetings!

My wife retired from a private school in early June. They have a 401k, though they are a nonprofit (not sure if this matters, just throwing out details). The 401k has only existed for 1 1/2 years since the pension was frozen. The payroll processing is subcontracted to a company (I don't know details of who is responsible for the actual deposits to accounts, SS, 401k, etc., but I assume it's the processing company).

Normally, they pay for a school year through August, even though you finish teaching in June. Then pick up for the next school year. When retiring, they process all remaining paychecks at the end of June (and stop health insurance, I assume to save a few $$$, but that's conjecture on my part).

The 401k deposits have never coincided with payroll dates. Every job I've had they're the next day. Her's have been weeks away, even early, very irregular. From searching I assume they're supposed to be in by the 15th of the month following withholding, but earlier is expected.

She gets paid twice a month. The end of May check's 401k deposit was June 8th. All is up to date at this point. June 15th there is one check. End of June are multiple checks (ones that would be processed through mid-August). The quarterly match from her employer hits on July 10th +/- as always (including the income from those checks that we're still waiting on the deposits from). Monday, July 16th, a deposit is made from her withholding presumably for all 5 checks, June 15th and 4 at end of June. We wanted to max out her tax deferred in order to roll to a Roth, so these were large numbers, and the last check was small since we'd hit the annual limit. The total deposit was 1 of the big checks short of the total that should be there.

In the past week we've not had success getting this rectified. The payroll company doesn't want to deal with us. They want to deal with the school. The school is technically off but we've had contact from the business manager who is looking into it (cooperative, and I hope she thinks we're right given past experience where we've found problems with the processing company and been correct). The payroll company thinks we wanted more money withheld, but says we hit the annual max. We know that, we just want the deposits they withheld to be deposited.

I'm not sure how long is reasonable to wait before pushing this. I found a Dept of Labor reference for complaints, and am wondering if that would be the right place to complain to. We would just like the final deposit made so we can roll over and carry on, but can't get them to respond. While they delay deposits (float's not worth much, this can't be a good sign), my impression is that the processor is not very capable. Low bidder, etc.

Very frustrated with the situation, but would like input from those of you with cooler heads and (hopefully!) related experience to guide me.

Thanks for any and all input!

oldphd
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Old 07-22-2012, 05:27 PM   #2
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In a situation like this, I don't think you can do more. Suppose the DoL gets involved, how does that really help you in the short-term?

I suppose the best thing would be to get a face-to-face appointment with the Business Manager at the Processing Company's office, so that all the parties involved are in the same room and in the same building where the records might be kept. I think that is not going to happen easily. I imagine the Processing Company is probably a one-person show (headmaster's sister-in-law) who goes on vacation to South America every June 15th for the summer.

Furthermore, would not the rollover involve a sign-off from somebody (a fiduciary) at the school? They might not be available until September anyways.
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Old 07-22-2012, 06:50 PM   #3
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They do not have to have the deposit done within a day or two.... there is leeway and some firms take advantage of that...

Look up the rules and you will find out how soon they are required... I do not know....
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Old 07-22-2012, 07:03 PM   #4
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They do not have to have the deposit done within a day or two.... there is leeway and some firms take advantage of that...

Look up the rules and you will find out how soon they are required... I do not know....
The rules I found indicated that it doesn't have to be within a day or two, but as soon as "funds are segregated". It also states that in no case should it go beyond the 15th of the month after they're withheld. In my view they violated that by going to the 16th of July, though the 15th was on Sunday so it could be argued. However, the deposit was about 25% light of the money withheld. That's where I'm getting heartburn.

The business manager should be in more or less full time starting August. This is not a small company for processing, it's local but not a mom and pop shop. Since it's my wife's, she needs to make the call, and I'm off working. But I give her the info, and we're waiting on calls and not getting anywhere.

Part of me just wants the deposit done so I can roll over and be done with them. Part of me thinks they've been using the float and pimping the end consumer so I should do what I can to rectify that for the other people who are customers. The records provided are poor, and I have to look up my own closing values to rectify values. Not happy with the service provided to this point.
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Old 07-22-2012, 08:00 PM   #5
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There is no valid reason for the lumpy and irregular deposits. Someone somewhere is playing games with this money. Complain immediately to whoever passes for HR and do it in writing.
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Old 07-22-2012, 08:32 PM   #6
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There is no valid reason for the lumpy and irregular deposits. Someone somewhere is playing games with this money. Complain immediately to whoever passes for HR and do it in writing.
Certified mail!
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Old 07-22-2012, 08:47 PM   #7
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I suppose you could suggest to the Local Processing Company that you will write a letter to the local newspaper telling them of your travails unless they fixed things in 3 days. Be sure to mention Madoff and Ponzi schemes in the letter. Such a letter might cause loss of business for them, but be very truthful because they will probably sue you.
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Old 07-22-2012, 09:10 PM   #8
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I would send them a letter with all the dates and amounts of withholding and when the withheld amounts hit her 401k to demonstrate the problem since it sounds like they are clueless and address the letter to all parties (the school, the payroll processing company, and the 401k administrator).

I would include that 1) if the situation is not remedied in x days that you will file a complaint with the attorney general and 2) that you expect "them" to make you whole for any difference between the number of shares that are purchased with the delayed deposit and the number of shares that would have been purchase had the deposit been made timely. Remind them that the authorities take absconding with payroll withholding very seriously since it is essentially stealing. Perhaps that will get their a$$e$ in gear.
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Old 07-23-2012, 12:02 AM   #9
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I would be checking my tax witholdings regularly too. While probably incompetence, could be something more,going on....
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Old 07-23-2012, 10:45 AM   #10
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As hard as it may be, try not to attribute to malice what can properly be explained as stupidity. They probably don't know, or interpreted the "reasonable time" to be longer than it is. I think that the DOL considers it "reasonable" for it to take up to 10 days from the date the funds are taken to when they are deposited. Beyond that and the DOL will come down on them pretty hard.

I'd take it up with them from a "you may not know about this, but" standpoint rather than an automatic assumption of nefarious intent. Small businesses are not all that smart about keeping up with stuff like this. A sincere and helpful-sounding email might just do the trick.
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Old 07-23-2012, 11:11 AM   #11
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You know, it also could be a cash flow problem.... that is one of the first signs... missed deposits of withheld funds.... late payments to retirement accounts etc.

I would talk to the people who process and see if they admit it is their problem or that they are not receiving funding to do their work.
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Old 07-23-2012, 11:29 AM   #12
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I'd take it up with them from a "you may not know about this, but" standpoint rather than an automatic assumption of nefarious intent. Small businesses are not all that smart about keeping up with stuff like this. A sincere and helpful-sounding email might just do the trick.
I agree with your suggestion.

Sometimes it's not intentional, but rather than someone (or the "system") slipped up.
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Old 07-23-2012, 11:39 AM   #13
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I agree with your suggestion.

Sometimes it's not intentional, but rather than someone (or the "system") slipped up.
I would normally agree that it is best to approach such things "nicely". however, from the OP it seems that the OP has already tried to get the situation resolved and is being stonewalled - so the OP may be beyond the nice stage and into the nasty stage.
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Old 07-23-2012, 12:21 PM   #14
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Lots of complicating factors here, so it is easier to make it worse than resolve. In these kinds of situations elevating the tone usually doesn't help or lead to a quick resolution.

The employee - oldphd's DW - should not be dealing with the processing company but with the school administrator. The processor may not be authorized or prepared to deal with the individual.

The processor may not be doing the actual processing but is just the front end to a Paychex or larger business.

The school administrator may not have a good enough understanding of the mechanics.

The fact that the processing takes so long is a separate issue, and if oldphd's DW no longer works there, it's no longer her concern. The missing money is the only issue now.

It's July and all these people are taking or planning vacations.

I would write a letter to the school stating there is an error in the accounts, that money is missing and requesting the shortfall be immediately rectified. Send a cc to the processing company. Confirm that multiple efforts have been made to clarify this, with no result, providing names and dates if possible. Indicate you will wait a prudent time for a response and resolution and then proceed to contact the appropriate regulatory agencies. Use certified mail. No threats, even tone, focus on the desired outcome.
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Old 07-23-2012, 12:22 PM   #15
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My advice is similar, start of with the "help me understand the 401k deposit process" with the employer. Go in with a spreadsheet for each pay period showing payday, gross earnings and each withholding, date 401k deposit made to that account. Start with your HR person, then talk to your finance person. Make good notes after each meeting summarizing what you learned. If, for some reason, the employer is making the deposit to the 401k administrator less frequently than monthly ask if the withholding is put in a separate trust account.

If the problem isn't resolved to your wife's satisfaction immediately implement MichaelB's plan of action.

If they are having cash flow issues the 401k areas is where it will happen.
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Old 07-23-2012, 06:06 PM   #16
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Thanks for the replies!

We've had issues with the payroll processor before. We made a change late last year to increase the amount of 401k withholding, which they did for one check, and then reverted. That wasn't the instruction, and it took a month to fix. Their reply? They couldn't believe anyone would have that much money taken out because that didn't leave much to take home so they thought we just meant for one check. This is a side comment but I mention it to demonstrate the level of cluelessness...

I think the comments regarding dealing with the school administrator as opposed to the payroll processor are spot on. The payroll processor doesn't seem to want to deal with us, telling us "you don't understand how this works" and blowing us off. As mentioned, the school administrator keeps a limited schedule during the summer. She understands that we just want them to go through the 5 checks one by one and account for the deposits, which will clearly demonstrate the problem. I have more confidence in her, and when my wife has discussed our issues with her, she rolls her eyes and says something along the lines of "You have no idea of the issues we've had with them.".

I agree that elevating it is an emotional reaction and I should calm down since it's not likely to help, but I am ticked, this is not rocket science. Given the twice a month pay cycle we've had delays of deposits approaching a month. We also had one deposit go in a few days early!?!? Yea, I would like to make THEIR lives miserable for a change.

Not related, but there are quarterly fees from the bank that is used as the 401k provider. Twice out of 6 quarters they've charged 10 times the standard fee. First one was straightened out, second is recent and pending. We got replies including, "I don't know", "I think the fees changed", "There can't be a mistake because it's done electronically", and "You can see that when you log in? You're not supposed to see that!" - it was no longer visible the next day . The reports (online and quarterly printed) don't even tell how many shares of a fund you get, just the dollar amounts. I've got a spreadsheet and track it to account for the value, not something I should have to do. I want to roll this over to consolidate with my standard provider ASAP once I have the correct amount in the account.

Thanks for talking me down, I will post a follow up when we get this rectified. At this point, there have been a total of 4-5 phone calls and a few e-mails over a week pointing out the error to the company and the administrator, I thought it would be handled by now.

oldphg
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Old 07-24-2012, 05:23 PM   #17
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My advice is similar, start of with the "help me understand the 401k deposit process" with the employer. Go in with a spreadsheet for each pay period showing payday, gross earnings and each withholding, date 401k deposit made to that account. Start with your HR person, then talk to your finance person. Make good notes after each meeting summarizing what you learned. If, for some reason, the employer is making the deposit to the 401k administrator less frequently than monthly ask if the withholding is put in a separate trust account.

If the problem isn't resolved to your wife's satisfaction immediately implement MichaelB's plan of action.

If they are having cash flow issues the 401k areas is where it will happen.
The bolded part is excellent advice. I've had various issues with payroll through the decades. They decided my vacation accrued negatively (went down rather than adding), then they decided to charge me for health insurance while on maternity leave - yet cancel my insurance. And the latest is to charge me about 4x the quoted amount for group insurance. Each time I went to HR with a spread sheet documenting the errors. (And photocopies of my payroll stubs.) It sometimes took a while (3-4 months to recover the 100 hours of lost vacation time)... but it was always eventually resolved.

Document everything. Keep track of who you talk to, time/date you talked to them. Keep the emails. That way when they say they're still working on it - you can say: "has any progress been made since you told me X would be done by Y date."

I've worked for the same company for 17 years - and have kept every paystub - it's saved my hindside when I've had to track down and prove the payroll errors.
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Old 07-28-2012, 09:40 AM   #18
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Update

Took 7 business days for the employer business manager to say, "It looks like you might be right about a missing deposit."

On the 9th business day they had "figured out the problem". The deposit was made yesterday, the 10th business day. While I can't say for sure, it sounds like everything is automated and they just implicitly trust the programs doing the payroll without actually thinking. Some sort of mistake took place with the software, and once verified they had to fix it manually.

No need to ask for additional funds to be made whole, I checked the closing prices and it turns out we came out $1.52 ahead! Woohoo!!

Between her employer, their payroll processor, the 401k admin, and the pension management company, there have been more issues than I can count over the years and it's very frustrating to deal with. I have had several brokerage accounts (different people and tax treatment - regular, IRA, Roth, etc.) with FIDO for around 25 years and made literally hundreds (a thousand?) transactions, and never a mistake, so I find it frustrating.

I want to get this rolled over and converted to a Roth, and now just have to wait for the fee correction in the 401k. We thought we had it, but noooo. Turns out the help line person did not have authority to remove a fee, but could add one. So when we got to the point of them acknowledging the error, she added the correct fee and said she would request the 10x fee be removed. In just a couple of days an action took place, the correct fee she had added was the one that got removed. This time my wife got through to a local person who handles the account (as opposed to the farmed out help line folks) who was helpful, saw the error on the first phone call, and asked for patience because it could take a couple of weeks to straighten out.

All things considered it didn't take that long. I've had a very busy summer with multiple issues at work which will ease up in 1 more week and my patience has been quite thin. Posters regularly mention the quality and kindness of the majority of participants on these boards, and I have to echo that. Well thought out responses, impartial views, I find it very useful to read them. Many thanks to all of you!
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Old 07-28-2012, 10:06 AM   #19
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(snip) ...I checked the closing prices and it turns out we came out $1.52 ahead! Woohoo!!
So, what was the "hourly cost" to you to "gain" the $1.52 ?...
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Old 07-28-2012, 10:25 AM   #20
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Wait, the hourly cost wasn't to gain the $1.52 it was to gain the entire deposit which had mysteriously gone missing, and to remove the 10x expected fee. The $1.52 was deemed close enough and no one is pursuing that.
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