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North Carolina - 401(k) Withholding North Carolina

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  • North Carolina - 401(k) Withholding North Carolina

    Here is the situation:

    My wife has been in her current position, under her current employer, for three years now. The first year, she signed up for the 401(k), to have it withheld from her paycheck. The second year, without her having completed any paperwork, or made any changes to any of her payroll, her employer did not withhold the 401(k). Now, in her third year, they have started withholding again.

    Both the finance department and the retirement company state that there is nothing that can be done, as it was a shared responsibility to ensure that the 401(k) was being withheld. Meaning that she should have checked her pay stub to make sure it was being withheld. However, I heard from another source, an HR analyst that her employer has a "fiduciary responsibility to make her whole" - meaning, they should compensate her for the amount that was not withheld, as well as the lost investment amount.

    She did not lose the money, she received it as part of her paycheck, instead of it being withheld.

    While I understand the part about checking your own paycheck, if she didn't change anything, she had no reasonable expectation that anything would be different, so why would she review her paystub?

    Her employer says that they must have made a mistake when they switched over to a new financial system. But to my knowledge, they never notified anyone that they were moving to new financial system.

    In my mind, they have made a severe error, and should compensate my wife for it. But is there any legal basis for this?

    Any thoughts are helpful, thanks.

  • #2
    She reviews her paystub every time because it's the responsible thing to do so that errors can be brought to the company's attention ASAP. Didn't she notice the net pay was different? It would have been, since not deducting the 401(K) contributions increased her taxable wages for income tax purposes.

    In any case, what does she want the company to do? And, was there a company match she lost out on?

    If the administrator changed, I believe the employer is required to notify the employees.....cbg? However, if all they said was convert to a new payroll system, they don't need to notify the employees.
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    • #3
      The net pay was different anyway, because she works for the school system, and they have an annualized pay increase. In addition to which, I believe that the NC school systems also received an additional bump in pay across the board.

      I understand that reviewing your paystub every month would be the responsible thing to do, but she didn't.

      As for what she lost out on - from July 2006 to July 2007 the DJI gained approximately 30%. Had the money been withheld and included in her 401(k), she would have had the benefit of that money, plus what was already in there, working for her in the market.

      As for what we would like them to do - in our opinion, their mistake has cost her money, specifically the potential investment increase that would have occurred had they withheld the money.


      • #4
        That is not very likely, since first, there is no way to show precisely what she would have lost, and secondly, she never brought the error to their attention.
        The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.


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