It’s important for your Finance team to know all the regs when it comes to pay deductions and 401(k) plans, especially when employees are repaying loans they’ve received from the company plan.
One employer wasn’t diligent with following the rules and guidelines for administering a 401(k). Now, it’s facing a long, expensive legal battle with a former employee.
Didn’t get info from employer
In Raya v. Barka et al, the former worker claimed there were multiple issues surrounding his participation in the company’s 401(k) plan.
The worker had taken a loan from the plan and was repaying it with payroll deductions. When he asked his employer for info about the plan, including a record of deposits and payments made to his account from both his own contributions and the employer’s, his request was denied.
So, he took his complaints to court. The employee claimed his employer intentionally withheld documents and failed to make contributions to his 401(k) as required. He also accused the employer of not allowing him to sign up for its pension plan.
The court decided he had enough evidence to prove the employer may have violated its duties under federal ERISA law. His case will now move forward.
Takeaways for Finance on 401(k) plans
This is a good reminder to make sure all employees have access to 401(k) plan documents that are up to date and give them an easy look at contributions and balances.
Work with your plan administrator to make sure these documents are readily available to participants, whether on paper or electronically.
It’s also smart to have your Finance team double-check the requirements for distributing and repaying loans from 401(k) plans. The feds made changes due to the COVID-19 pandemic. Your Finance pros must handle this correctly to avoid federal scrutiny or other legal issues down the line for your company.