For nearly a decade, Lena assumed a piece of every paycheck went into her 401(k). However, when she checked her company\u2019s retirement portal, she noticed something was seriously off.<\/p>\n
There wasn\u2019t nearly as much money in her 401(k) to account for her time at the company and the market\u2019s growth. As she double-checked statements and details in her profile, Lena realized what was at the root of the problem: There was a typo on her birth date.<\/p>\n<\/p>\n
Apparently, when Lena was hired some ten years ago, it appeared that she was 14 rather than 24. Because of that error, the company\u2019s automated system marked her as \u201cineligible\u201d for years of 401(k) participation.<\/p>\n
Imagine the result. She would have missed thousands of contributions and the compounded investment growth that would have come with them \u2014 all because of one tiny data entry error.<\/p>\n
A 401(k) is supposed to be straightforward to understand and implement. Here\u2019s the basic structure: The employer sets up a tax-deferred account, employees choose how much to contribute from each paycheck and that money gets invested automatically.<\/p>\n
Most companies also offer a match, which is basically free money that employers contribute based on how much workers put in.<\/p>\n
For example, say a company matches 50% of contributions up to 5% of an employee\u2019s salary. If someone earns $70,000 and contributes $3,500 (5%), they\u2019d be maximizing the company match, getting another $1,750 on which to earn interest.<\/p>\n
But, there are 401(k) eligibility rules.<\/p>\n
Federal law allows employers to set waiting periods before new employees can participate, but the IRS policy is one year of service. (1) The IRS also has a minimum age requirement of 21. Once employees meet those criteria, they should get enrolled and receive all the contributions they\u2019re eligible for.<\/p>\n
That\u2019s where Lena\u2019s situation went sideways. Because her starting age was incorrect, the system flagged her as too young to participate in the early years. Every payroll cycle, her employer\u2019s contribution system skipped over her, and nobody caught it because the automatic program wasn\u2019t built to question its own data.<\/p>\n
Story Continues <\/p>\n
Read more: Robert Kiyosaki warns of a ‘Greater Depression’ coming to the US \u2014 with millions of Americans going poor. But he says these 2 ‘easy-money’ assets will bring in \u2018great wealth\u2019<\/a>. How to get in now<\/strong><\/p>\n It\u2019s understandable how Lena could have gotten into her predicament, but the question now is whether someone can reclaim missed retirement money after such an error.<\/p>\n Step one is to build a case with tons of official evidence. We\u2019re talking about pay stubs, benefit statements and any onboarding documents that might show a mistaken detail, like birth date, and the 401(k) eligibility requirements.<\/p>\n Next, you\u2019d want to contact your HR department in an email or letter with a polite yet firm message explaining the missing 401(k) contributions and data error. Ask for a full audit of the account and payroll history.<\/p>\n Remember that under the Employee Retirement Income Security Act (ERISA), employers have a fiduciary duty to maintain accurate plan records and correct errors. (2)<\/p>\n If the company confirms the mistake, it will likely need to make a “plan correction.” That means depositing the missed contributions (both the employee’s and the employer’s match) into the account, plus an amount to compensate for lost investment growth.<\/p>\n Hopefully, the case gets resolved at this point, but it\u2019s possible to escalate it to the U.S. Department of Labor\u2019s Employee Benefits Security Administration (EBSA). (3) This agency has the tools to investigate and compel employers to fix mistakes. Enlisting the help of a financial advisor<\/a> or employment attorney can also help in extreme cases.<\/p>\n While it’s nice to know there are resources to help reclaim retirement savings, it’s always best to prevent a 401(k) mess up in the first place.<\/p>\n The most effective way to minimize the chances of this situation is to be super vigilant about checking 401(k) contributions \u2014 from the very first pay stub. It also helps to review statements at least once a quarter and double-check personal information like date of birth, hire date and address.<\/p>\n It may sound trite, but awareness is the best defense. Knowing all the details of your 401(k) plan and following the money rather than trusting automated systems are the best strategies for maximizing your retirement savings.<\/p>\n Join 200,000+ readers and get Moneywise\u2019s best stories and exclusive interviews first \u2014 clear insights curated and delivered weekly. Subscribe now.<\/a><\/strong><\/p>\n We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines<\/a>.<\/p>\n IRS (1<\/a>); U.S. Department of Labor (2<\/a>); Employee Benefits Security Administration (3<\/a>)<\/p>\n This article provides information only and should not be construed as advice. It is provided without warranty of any kind.<\/p>\n","protected":false},"excerpt":{"rendered":"For nearly a decade, Lena assumed a piece of every paycheck went into her 401(k). 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