[Image shows top of the March 22 letter]
Updated at 6:35 p.m., March 24: Following is the text of the Hewitt letter provided to me by a former Gannett employee who took a buyout in 2008; I'm omitting personally identifable information.
[Name]
[Street Address]
[City, State, ZIP]
Due to a programming error, a special employer contribution was posted to your Gannett 401(k) Savings Plan account by mistake on Friday, Feb. 5, 2010. Subsequent to receiving the contribution, you requested a payment from the plan. Because the additional contribution was applied to your account in error and did not reflect actual funds owed (or due) to you, the additional contribution needs to be returned to the plan.
Repaying the Overpayment Amount
Because the plan is subject to strict IRS requirements, we must take certain steps to correct this mistake. One of the corrective actions required by the IRS is that we ask you to return the overpayment to the plan, so please remit this overpayment to the plan. Additionally, the IRS requires us to inform you that the overpayment is not eligible for favorable tax treatment accorded to distributions from a qualified plan (for example, it is not eligible for a tax-free rollover).
Please remit payment in the amount of $505.94 payable to "Gannett 401(k) Savings Plan by April 15, 2010. Money orders, cashier's checks, certified checks and personal checks are all acceptable. Please remit your payment with a copy of this letter to:
Regular mail:
Gannett Benefits Center
P.O. Box 785002
Orlando, FL 32878-5002
Overnight mail:
Gannett Benefits Center
2300 Discovery Drive
Orlando, FL 32826-3712
Please include your name and Social Security number with your payment.
We sincerely apologize for the inconvenience; thank you in advance for your cooperation.
From my original post, yesterday: Two former Gannett employees say they received a letter from Gannett's 401(k) plan administrator, Hewitt, requesting return of an overpayment to their accounts because of a "programming error.''
I've been given a copy of one letter. Dated March 22, it requests repayment of about $506 by April 15 to a Gannett Benefits Center in Orlando, Fla. The letter cites "strict IRS requirements" for the request.
The former employees ask if any other people received this request. And one of them also wonders whether they will suffer an IRS penalty for what would amount to an early withdrawal.
Please post your replies in the comments section, below. To e-mail confidentially, write jimhopkins[at]gmail[dot-com]; see Tipsters Anonymous Policy in the rail, upper right.
Need to know a little more about the details of what contributions these employees were making to their 401K. Were they putting in the maximum or 10 percent of their income? If so, the furloughs would have reduced that total income amount, explaining the overpayment. There is a limit on how much you can put into a 401K each year.
ReplyDeleteBoth employees say they left the company in 2008, meaning before the furloughs in 2009.
ReplyDeleteCould the mistaken overpayments be the annual deposits that the company makes to 401-K accounts instead of contributing to the frozen pension fund?
ReplyDeleteIf there was truly an error, one would think they would at least let them keep the $506.00 +/- being that $5,000 +/- was deducted before they even received the check after they were laid off, and blamed on - because the dumb stock sunk to an all time low!
ReplyDeleteSounds like more finagling. I would most definitely get it checked out by a third party - than to take their word for it! They should send along with that letter - a visual of the miscalculated formula used to get to the "amount" the check was cut for, and also a visual showing the formula they should have used leading up to the discovery of the $506 +/- error, so that the person along with their Accountant can file those visuals along with their taxes IF the need be!
What a very sore subject! Bad enough they were laid off, now after the fact - they are being harassed for money they probably don't even have!
Heh these are IRS rules. There is no flexibility. It sucks but thems the rules!
ReplyDeleteWere these highly paid employees who made more than $110,000?
ReplyDeleteIf so they are classified by the IRS as "highly compensated employees" and may be subject to contribution limits based on GCI's overall 401K participation rates.
It is very complicated, but the contributions of highly compensated employees cannot exceed 125 percent of the average deferral percentage of the lower level non-highly-compensated employees each year. The operators of the plans normally do this computation in January after the tax year ends.
The give-back is taxable as ordinary income.
Rather than withdraw the $502 from my 4O1K, I would take it out of my regular bank account to avoid the early withdrawal problem. I assume they have moved their account from Hewitt to another 401K operator, so it will become very confusing trying to report the reasons for this transfer on your income taxes.
ReplyDeleteYes. I received the letter too, but my account said that "technically" we should pay it back, but the reality is that no one will actually pay it back and Gannett or Hewitt will have to make good on it on our behalf.
ReplyDeleteSo basically, do not pay it back and let Gannett fix their own error.
I just got a call too -- I took the distribution in February as stock, and $9 and change for presumbably what wasn't and even share number. The caller was from ybr, and said they had already reversed the stock transfer and now want their $9+ too. This comes a day after the latest session on the phone asking why I couldn't see the stock show up in my rollover IRA. She said letter was coming, too, but it hasn't yet arrived. I'm a 12/08 layoff. Where are we supposed to send the cash from, if it's the IRA, is that a taxable, penalty-driving distribution?
ReplyDeleteNine bucks is one thing, the $500 example above is truly outrageous.
Actually to believe it or not the best answer would be to go to your local IRS Office. Generally the agents there are very knowledgeable and will help you determine if in fact what Hewitt is doing is correct or illegal. If Hewitt does not show you a detailed description of what went wrong, run to the IRS immediately
ReplyDeleteI wouldn't take what Hewitt says at face value. It has a history of botches and also has some famous lawsuits against it. Here's just one example: http://www.earthtimes.org/articles/show/153299.html
ReplyDeleteI haven't yet, at least, received such a letter. I left the same newspaper the same year and also moved my 401k immediately. My money was all in the so-called fixed investments. I wonder if the "error" involves an investment fund, not merely "programming error." (WTF?)
If that's the case, this may be as much or more of an SEC matter as an IRS one. Errors in investments, i.e. banking, have multiple layers of oversight.
The claim the IRS demands the money from you through Hewitt doesn't pass the smell test, based on what's reported or assumed here. If the IRS strictly required it of you, it would have written you. If Hewitt felt it was so important to collect by April 15, it would have sent the letter by certified mail to be signed by addressee only, not regular first class.
First thing I'd do is send a letter to Hewitt by return-receipt mail demanding the paper trail documenting this error. I'd demand the proofs by April 1 if Hewitt expects you to even consider submitting the money it demands by April 15.
I'd cc the letter to the Securities Exchange Commission, the IRS, the U.S. Treasury and the federal Department of Labor -- and, perhaps, the U.S. attorney for New Jersey, as it sounds like Hewitt might be seen as harassing, threatening or extorting in this letter.
Jim, is the error in the 401k or in the pension payout? I've been hearing and reading this both ways. The two are not interchangeable. You say you have the letter? Can you be more specific?
ReplyDeleteThanks, Jim, the letter makes it clearer what happened, but opens a new issue: if someone left in 2008, why are they still getting payments from Hewitt in 2010.
ReplyDeleteNevertheless, I would put the letter in the circular file and take the cash. What are they going to do? Garnish your paycheck? Their mistake is in your favor. Whether you do this, I guess, will depend on how you were treated when you left your job.
The threat of the IRS is only implied. Indeed, they seem to believe you are going to keep the money: "Additionally, the IRS requires us to inform you that the overpayment is not eligible for favorable tax treatment accorded to distributions from a qualified plan (for example, it is not eligible for a tax-free rollover)." In other words, if you keep it, you have to report it as regular income. Duh.
Just consider it a bonus, like Craig Dubow.
ReplyDeleteI have not received such a letter but as long as it took me (6 months) to get my 401k check when i left i would not give them back anything. They can take it out of fat boy Arnie Garsons check.
ReplyDeleteIs this issue only with Asbury Park Press employees? Gannett massively screwed up APP employee pensions, IMHO. It has refused to account for its payout formula for pre-Gannett APP employees.
ReplyDeleteAt least one person who received this letter tells me Hewitt said the Feb. 5, 2010, payment was due to an error in the "pension freeze," which was in 2007 or early 2008 (didn't look that up yet but it was before buyouts and layoffs).
Hewitt's representative also told that person that six MORE such payments were to come.
A group of concerned employees and former employees at the APP are asking federal authorities to investigate Gannett's APP pension disbursements. Anyone else who is concerned may join in by writing to apppensions@live.com.
What's doubly curious to me here is the comment from the person who seems to say his/her payment was made in stocks and taken back in stocks. The relationship of these actions to the SEC may be relevant, and awfully problematic.
Jim, can you get a copy of the letters or emails that Gannett sent explaining why the payment was being made in the first place?
Despite how the form letter to them is worded, former employees who had moved their 401k out of Gannett/Hewitt apparently received checks in the mail around Feb. 5 instead of payments to a 401k accounts managed by Hewitt. This apparently is why Gannett has to ask them to return it.
ReplyDeletePresumably many others (all current employees?) had it posted to their accounts and then taken back?
But, not every APP person who was affected by the pension freeze and had 401ks received the payment or the demand letter. I wonder why.
I just received the same letter. What this is all about is when they froze the pension plan they gave you this payment in your 401k. The amount went by your salary and how many years you had at Gannett. I was laid off August of 2008. You had to have a certain amount of years in I believe to get this.
ReplyDeleteI got the same payment Feb of 2009 for 2008. When I saw that I got it again I thought that maybe this was something I would get if I did nor roll over the 401K into something else. I worked at Gannett almost 40 years.
The letter states that on March 26 the original contribution and any gains or losses will be debited from my 401K account.
You know that old saying Easy Come Easy Go.
Regarding 12:43 p.m.....Hmmmm,I was laid off in August 2009 and then early this year got a stock payment credited to my 401-K, which I assume was for the time I worked in 2009.
ReplyDeleteI was also with Gannett for almost 40 years, and I was also assuming that the payments would continue as long as I kept the 401-k with Hewitt.
But that doesn't make any sense. If Gannett intended to do the right thing and continue the payments to compensate for the frozen pension, then the company could have told me that and asked me to provide them with an IRA account where future funds could be deposited.
I haven't gotten a letter, and I don't know if any money was simply transferred back to Gannett. A couple grand is a relatively small amount to notice.
I'll look into this and report back when I know more.
Regarding 8:58 PM you should be ok with the payment you got early this year. That was for the time you worked in 2009. I was laid off in 2008 and got a payment in 2009 which they are not touching.
ReplyDeleteI too thought that if I kept my 401K with Hewitt that I would continue to receive these payments. That however it seems is not the case.
Anonymous 12:43 PM
If Gannett owes people who had pensions, doesn't it owe former employees just the same as those who left, whether they moved their accounts or not?
ReplyDeleteThe pension is mutually exclusive of the 401k.
What exactly is that "special" pension freeze payment? What is the formula for deciding how much someone gets?
Regarding 8:18 AM.They froze the pension plan on July 31 2008. Gannett then sent out a package telling each employee what their pension was worth when they reached age 65.
ReplyDeleteIt also explained changes in the 401K. On page 4 of the pamphlet it explains the special additional contributions to the 401K for each individual. It says that you will receive this additional contribution as long as you remain employed by Gannett in a position that entitles you to participate in the 401K savings plan.
8:18 if you were employed at Gannett on or before July 31 2008 you should have received this package explaining the changes when they froze the plan.
This is very interesting. I was laid off in August and had taken an early withdrawal from my 401K at an earlier time, intending to pay it back with payroll deductions. That never happened so I rolled the 401K into a Roth IRA (and boy, did Hewitt scream about that, tried to take one-third of it in "fees" till I had a financial consultant of my choosing get on the phone with Hewitt).
ReplyDeleteWhere it says "the plan is subject to strict IRS requirements" it means, as I understand it and as it applied to me, that I had to pay the penalty for early withdrawal plus count the small amount of money I withdrew as income. I just did my taxes and get a little money back. Best day was when I was rid of Hewitt.
Still getting letters from Hewitt demanding return of money they say I was overpaid into my 401K - I left in December 2008 and rolled the plan into an IRA with a mutual fund company. Do these demands have any force to them? If I just keep ignoring them, is there anything Hewitt can do? It's their mistake and I have never received any explanation of how the error occurred. They say it's my 3rd and final notification. Are they really going to come after me for $510???
ReplyDelete