Hi! If an employer overpays wages and as a result makes a larger than usual employee contribution and employer matching contribution to a 401(k) plam, how should this best be corrected? The employer has proposed that the employee will repay the excess wages and employee contribution via check or payroll deduction over a period of time. This does not seem to correct the problem that the money should not be in the 401(k) account. The error happened with a small number of employees at a very large employer. Thanks, JWIRA

The money should be taken out of the participant's account and put in a suspense account. The dollars should then be used to offset the employer's next contribution.

(At least, that's the way we do it.)

If the wages were simply overpaid, and they're simply going to reduce future wages, then won't the 401(k) issues fix themselves? I mean, if someone elected 5% as a deferral, and the company overpaid the wages and put in 5% of the overpaid wages, unless they're asking for the money back, and they're not, I don't see a problem.

I agree with Bird on this one.