Complaints

• Initial Complaint

  09/18/2023

  Complaint Type:

  Billing Issues

  Status:

  Answered

  More info

  - In September of 2020, our accountant informed us of an over-contribution to the 401(K)s of two owners of the business. We immediately informed our EF account rep, who assured us that during the annual plan testing, if their Compliance team found any over funded contributions, they would process a Correction Summary and have the money distributed back to us.- Over a year later, in October of 2021, while communicating with our rep on other issues, we asked her what was the result of the testing by their Compliance team and whether the excess contributions had been returned. To our shock, she replied that our plans 2020 testing was not yet complete! The next day, surprisingly, we were informed that our plans annual testing was completed and we received the Correction Summary for the over contributions. We eventually received checks for the excess contributions and the associated earnings and ****-Rs for the distributions of the excess contributions.- In October of 2022, as our taxes were prepared for filing for the 2021 tax year, we were informed that we would be double-taxed for the late distributions of the excess contributions (and that the double-taxation could have been avoided if the over contributions had been refunded in a timely manner). The tax penalty was significant, resulting in several thousand dollars of additional taxes due to the late return of funds. Obviously, we were not happy about this.- We asked Employee Fiduciary to reimburse us for these extra taxes. A Director said he spoke with the Owner about this issue and the Owner would not do so, and would only cover the next quarters plan fees of a few hundred dollars. They would not take responsibility for their negligence that resulted in a huge cost to us.

  

  Business response

  09/21/2023

  In September 2020, client notified his ** customer service rep that, according to his accountant, his business had contributed $2,807.70 more than the 2020 402(g) limit ($19,500) to his personal account and $8,153.85 to his wifes account. He asked about the refund process. Our rep told him the issue would be corrected during the year-end testing process in 2021. While technically true, our rep should have escalated the matter to the ** department responsible for year-end testing immediately.  If they found the overages to be legitimate, they would calculate earnings on the principal and get a corrective distribution summary to the client for distribution approval.
  
  That said, the need for refunds was clear and their amount was substantial. The client knew to expect checks for their amount and ****-Rs for their tax reporting.
  
  In October 2022 (more than a year after the overages were ultimately distributed), we received our first complaint about this issue.  That complaint was immediately escalated to me. Given my understanding of the fact pattern, I thought 3-month fee credit for our role was fair.
  
  I still do. The 402(g) limit on annual 401(k) contributions is clear. For this reason, 402(g) violations are rare and the tax consequence for correcting them late are steep. The client's plan was established in 2018.  They properly capped contributions at the 402(g) limit in 2018 or 2019. I tried reaching the client by phone and email on Monday to see if they had any additional information about this issue. I have not heard back.   
  

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