Payroll deduction change screwed up other benefit contributions

[Scallywag]

Need advice from anyone who works payroll / HR / has info.

Last month, H increased his ROTH 401K to 75% of his paycheck at the Vanguard site. Vanguard takes a MONTH to process these changes, apparently. That would be two pay periods for H.

Today, he happened to check his pay stub (pay will be deposited on Friday). Long story short, there was ZERO dollars contributed to his legal insurance plan because there was simply NO MONEY left. It all went to the ROTH 401K.

We absolutely cannot afford to go without legal insurance. He rushed to Vanguard's site to reduce his contribution and as expected, the change won't take effect for another 2 pay periods! He sent an email to HR asking if he could pay the legal insurance premium another way.

Are we screwed? This was unanticipated. We knew there'd be close to NO pay due to the large ROTH deduction.

What we did NOT anticipate was that there could be no money to pay for the after tax "VOLUNTEER BENEFIT" programs. Legal insurance is an absolute must for us. We can't afford to have it terminated because we did not expect to not have enough money to pay for it via payroll deductions.

H asked HR if he could pay the legal plan directly or send a check to payroll or HR. I'm at my wits' end and my anxiety is through the roof. How can this be handled? Will be terminated from the legal plan?

Help!

[kork13]

Can he contact the insurance company directly? In any case, because it simply comes out as a payroll deduction, it should be no problem for him to write a check for the amount that is due. As long as you are quick about it and communicate with the insurance company, it should be no problem. Just talk to HR, talk to the insurance company, and everything will be okay.

[HundredK]

Insurance companies deal with this sort of thing all the time, like when people take leaves of absence, etc. They're well equipped to let you make the payment on your own, and remember, that's what they'd prefer. They want to keep you as a client just as much as you want to continue being one. It'll all be fine.

[ua_guy]

Another vote for... Wait for HR to respond. I just went through something similar. It's in their best interest to help you, they should help you find a way, and of course, the insurance company wants to keep you as a customer too. It's all in your favor, really.

[Scallywag]

Thank you all so much. HR responded that as this is a "complicated query" and will "get back to us in a week"! Like, really? How complicated is this?

I think i will take the advice here to contact the insurance company directly so as not to miss any payments. Will report back once I know how this goes.

[Scallywag]

Update:

Insurance company just told me that they cannot accept payments directly if the premiums were paid via payroll deductions! Homo habilis at HR claims they "don't know nothing about this" and directed us to payroll who take 48 hours to respond. Since next week is the long weekend, we may not hear back until Monday after next.

We will be terminated if payments are not recieved in a month. This looks really bad for us, just because absolute MORONS work in his HR. Oh, joy!

[LivingAlmostLarge]

This is a stupid question, why is there no money left? Isn't it 75% of after tax dollars so there should be 25% of after tax paycheck?

[ua_guy]

Another option - can you purchase coverage maybe through a different vendor on your own, outside of your employer, before the other insurance expires? It might involve spending a little bit, but would hopefully ensure that you have continuous coverage even if it's between two different carriers. If you are currently using it to pay legal expenses, it might be worth asking any law offices you are working with from whom they will accept coverage, etc.

It would really suck if you are dependent on this, and HR does end up dragging their feet or taking too long to fix something. Usually there is zero recourse, and, keeping a good relationship with your employer is important for obvious reasons.

[Scallywag]

This is a stupid question, why is there no money left? Isn't it 75% of after tax dollars so there should be 25% of after tax paycheck?

Exactly why I'm so freaking confused. There should be money for the insurance premium, because it's not a lot of money. Homo habilis probably can't do basic math either.

[Scallywag]

Another option - can you purchase coverage maybe through a different vendor on your own, outside of your employer, before the other insurance expires? It might involve spending a little bit, but would hopefully ensure that you have continuous coverage even if it's between two different carriers. If you are currently using it to pay legal expenses, it might be worth asking any law offices you are working with from whom they will accept coverage, etc.

It would really suck if you are dependent on this, and HR does end up dragging their feet or taking too long to fix something. Usually there is zero recourse, and, keeping a good relationship with your employer is important for obvious reasons.

This, unfortunately, might be our only option if they can't fix this. We can't spit where we eat and we may need to suck it up and find another plan or pray nothing goes wrong until next open enrollment.

[disneysteve]

Exactly why I'm so freaking confused. There should be money for the insurance premium, because it's not a lot of money.

Have you checked to make sure the paychecks are correct? Are taxes being properly applied? Are there any other deductions coming out like health insurance, life insurance, etc?

If 75% after taxes went to his Roth 401K, what happened to the other 25%?

[Like2Plan]

Have you checked to make sure the paychecks are correct? Are taxes being properly applied? Are there any other deductions coming out like health insurance, life insurance, etc?

If 75% after taxes went to his Roth 401K, what happened to the other 25%?

disneysteve,
The only way I have ever seen 401k elections done is as a % of gross. DH has Roth 401K set at 15%--so it is 15% of the gross amount of his pay.

The way some plans do it is they take the 401k contribution out after all the other deductions are made and if there isn't enough for the entire 75% (or whatever amount), they will not make any contribution into the plan for that pay period. But, it looks like Scallywag's plan takes the Roth 401k deduction before any other elections.

So, there are probably deductions for federal income tax --in DS's case it is about 22%. Medicare tax is 1.45%. State income tax is another 5%. FSA is another 1%. So, added altogether--DH has about 30% of deductions. I would assume Scallywag has federal, state and medicare taxes--they must added up to more than 25%?

[Scallywag]

disneysteve,
The only way I have ever seen 401k elections done is as a % of gross. DH has Roth 401K set at 15%--so it is 15% of the gross amount of his pay.

The way some plans do it is they take the 401k contribution out after all the other deductions are made and if there isn't enough for the entire 75% (or whatever amount), they will not make any contribution into the plan for that pay period. But, it looks like Scallywag's plan takes the Roth 401k deduction before any other elections.

So, there are probably deductions for federal income tax --in DS's case it is about 22%. Medicare tax is 1.45%. State income tax is another 5%. FSA is another 1%. So, added altogether--DH has about 30% of deductions. I would assume Scallywag has federal, state and medicare taxes--they must added up to more than 25%?

Yes. This.

They took 75% of his GROSS before everything else on the post tax deduction (in order of priority, the 401K topped everything else)! Odd how i only noticed it now. I always assumed it would be 75% of his net. Ugh.

75% of his gross left nothing for his voluntary benefits including the legal plan. Well, I got an education today.

[disneysteve]

disneysteve,
The only way I have ever seen 401k elections done is as a % of gross.

That makes sense.

So if the gross pay is $5,000, then $3,750 would go to the Roth 401K. Other pre-tax deductions (health insurance, etc.) would come out of the remaining $1,250. Then whatever was left would be taxed. I can see that leaving not much.

[Like2Plan]

Yes. This.

They took 75% of his GROSS before everything else on the post tax deduction (in order of priority, the 401K topped everything else)! Odd how i only noticed it now. I always assumed it would be 75% of his net. Ugh.

75% of his gross left nothing for his voluntary benefits including the legal plan. Well, I got an education today.

I'm really sorry this happened to you. The only other thing is maybe they will take out more to make up for it in a future pay period? Like--what if it had been a FSA contribution? I wouldn't think they wouldn't just let that go.