Employer overpaid profit sharing

[chardonnay]

the compensation consultant issued certificates at year end 2009 with my vested account balance of my profit sharing. In May I terminated and rolled over into an ROTH IRA, and paid the taxes. In July the former employer says I was overpaid by about 50%. They sent a letter to my bank, and my bank has frozen my accounts, including checking and savings.

How is their error, if that is truly the case, my fault or problem?

 

[Michael Wechsler]

What are we missing here? A bank should not be freezing your accounts based solely on a letter by your former employer. Was a lawyer or information subpoena with restraining order used? Is there a judgment against you?

 

[chardonnay]

Apparently the banks attorney cited RCW 30.22.210 which says the bank has the right to hold the depositors funds if they have information that someone else might have claim to them. So I guess now anyone can claim rights to anyones bank account at any time with just a simple letter.

 

[Michael Wechsler]

Apparently the banks attorney cited RCW 30.22.210 which says the bank has the right to hold the depositors funds if they have information that someone else might have claim to them. So I guess now anyone can claim rights to anyones bank account at any time with just a simple letter.

Let's see what it says:

Washington State
RCW 30.22.210
Authority to withhold payment

Nothing contained in this chapter shall be deemed to require any financial institution to make any payment from an account to a depositor, or any trust or P.O.D. account beneficiary, or any other person claiming an interest in any funds deposited in the account, if the financial institution has actual knowledge of the existence of a dispute between the depositors, beneficiaries, or other persons concerning their respective rights of ownerships to the funds contained in, or proposed to be withdrawn, or previously withdrawn from the account, or in the event the financial institution is otherwise uncertain as to who is entitled to the funds pursuant to the contract of deposit. In any such case, the financial institution may, without liability, notify, in writing, all depositors, beneficiaries, or other persons claiming an interest in the account of either its uncertainty as to who is entitled to the distributions or the existence of any dispute, and may also, without liability, refuse to disburse any funds contained in the account to any depositor, and/or trust or P.O.D. account beneficiary thereof, and/or other persons claiming an interest therein, until such time as either:

(1) All such depositors and/or beneficiaries have consented, in writing, to the requested payment; or

(2) The payment is authorized or directed by a court of proper jurisdiction.

 

[Michael Wechsler]

1) Did the former employer ever send you a notice about an alleged overpayment?

2) How much money did the bank freeze? Is it greater than the amount the former employer claims to have overpaid you? Does the letter specify any amount in dispute?

 

[chardonnay]

First the compensation consultant sent me a non-shalont email saying there was an error. In his second email he showed me his two calculation percentages. Means nothing to me. The former employer sent a letter addressed TO ME, and sent a copy of that letter to the bank, stating the amount they overpaid. About $23,000. Most of the money was used. In a good way .

The Dept of Labor and the IRS say the fiduciary bears the responsibility here, not the participant. I found the IRS language, just need EBSA language to back it up.

 

[Michael Wechsler]

Did you ask anyone whether the former employer may have accidentally overpaid you? This doesn't mean you just get to walk away with the money, although it could take some time to return it...

 

[chardonnay]

BTW, I appreciate your response. Kind of lost in a sea of legal, federal govt mumbo jumbo. BUT I found this:

If the amount so assigned
to a particular highly compensated
employee has been previously distributed,
the amount is an ExcessAmount within the
meaning of section 5.01(3) of this revenue
procedure. Thus, pursuant to section 6.06
of this revenue procedure, the employer
must notify the employee that the Excess
Amount is not eligible for favorable tax
treatment accorded to distributions from
qualified plans (and, specifically, is not eligible
for tax-free rollover).


looking for 5.01(3) and 6.06

 

[chardonnay]

also found this re overpayment corrections at the IRS website:

irs.gov/irb/2008-35_IRB/ar10.html#d0e1304

THE EMPLOYER tries to recoup the overpayment with interest, however, if the employee does not have the full amount the employer, or another person (undefined) must contribute the difference.