janedoe123
Junior Member
What is the name of your state (only U.S. law)? Texas
My husband worked for Company A through April 2008, when his seasonal job ended. At that point, his 401k had 400 shares of Fund X. He was rehired by Company A about a month later, for another seasonal job. The 401k plan rules state that rehires must wait 60 days before being eligible to contribute to the 401k. However, the company continued making 401k deductions from his paycheck during this time. (We were not aware of the rule and were happy to see the 401k contributions continuing.) During this time, an additional 100 shares of Fund X were purchased in the 401k. (Using round numbers for simplicity.)
Now the company has realized their mistake and has returned the contributions that were erroneously made during the time my husband was ineligible. My questions:
1) Is this situation treated exactly the same as if he had made excess contributions (going over the annual max limit) and/or was an HCE?
2) The ineligible contribution amount was $2,778. The fund was down at the time the correction was made, yet the FULL $2,778 was returned. Is this correct? I thought they were supposed to return the ineligible contributions plus/minus any gains/losses.
3) In order to return the full $2,778, they had to sell more than the 100 shares that were bought with the ineligible contributions. So as a result of their mistake, we now have FEWER shares than if the error were never made. Is this correct? This just doesn't seem right to me. (I guess it goes back to Q2.)
In short, I want to know if my husband's company handled this correctly. If not, what what should have been done and what do we do about it now?
Thank you!!!What is the name of your state (only U.S. law)?
My husband worked for Company A through April 2008, when his seasonal job ended. At that point, his 401k had 400 shares of Fund X. He was rehired by Company A about a month later, for another seasonal job. The 401k plan rules state that rehires must wait 60 days before being eligible to contribute to the 401k. However, the company continued making 401k deductions from his paycheck during this time. (We were not aware of the rule and were happy to see the 401k contributions continuing.) During this time, an additional 100 shares of Fund X were purchased in the 401k. (Using round numbers for simplicity.)
Now the company has realized their mistake and has returned the contributions that were erroneously made during the time my husband was ineligible. My questions:
1) Is this situation treated exactly the same as if he had made excess contributions (going over the annual max limit) and/or was an HCE?
2) The ineligible contribution amount was $2,778. The fund was down at the time the correction was made, yet the FULL $2,778 was returned. Is this correct? I thought they were supposed to return the ineligible contributions plus/minus any gains/losses.
3) In order to return the full $2,778, they had to sell more than the 100 shares that were bought with the ineligible contributions. So as a result of their mistake, we now have FEWER shares than if the error were never made. Is this correct? This just doesn't seem right to me. (I guess it goes back to Q2.)
In short, I want to know if my husband's company handled this correctly. If not, what what should have been done and what do we do about it now?
Thank you!!!What is the name of your state (only U.S. law)?