1803 - Underfunded Savings Plus Accounts
- Accounting Officers
- Budget Officers
- Employee Benefits Officers
- Personnel Officers
- Personnel Transactions Staff
- Personnel Transactions Supervisors
- provides information about Underfunded Savings Plus Accounts
State agencies and departments are responsible for the cost of their processing errors that result in underfunding of their employees’ 401(k) and 457(b) plans, Alternate Retirement Program (ARP) account, and the Part-time, Seasonal, and Temporary Employees Retirement Program (PST) account.
State and federal law require errors that result in underfunding of an employee’s 401(k), 457(b), ARP, and/or PST account be covered by the entity responsible for the error without deducting or offsetting the employee’s compensation. Accordingly, agencies and departments bear the cost of such processing errors that result in underfunding of the aforementioned accounts.
Costs include corrective contributions and lost earnings that would have been deposited to the employee’s account if the error had not occurred.
For errors made on or after October 1, 2012, in addition to corrective contributions and lost earnings, departments are charged a $500 administrative fee for each employee whose account is underfunded. The fee helps offset costs associated with correcting the accounts.
For state agencies on the central payroll system who incur such liability, the State Controller’s Office will transfer the value of the corrective contributions and lost earnings from the agency, directly to CalHR, in accordance with Government Code Section 11255. If the responsible entity is not a state agency subject to Government Code Section 11255, CalHR will obtain reimbursement directly from the entity.
For PST employees who reached their 1000-hours-per-fiscal-year cap prior to July 1, 2013 and were subject to the ARP
- If the 505 transaction to convert the employee’s retirement from PST to ARP was keyed more than 90 days after the employee’s ARP effective date, the ARP account is considered underfunded. The department is responsible for funding the missed ARP contributions and lost earnings. Departments need to work with their accounting office to clear the corresponding employee’s accounts receivables (ARs) established for the missed ARP contributions.
- If the 505 is keyed within 90 days of the ARP effective date, it is considered normal processing and the employee is responsible for funding the AR.
The following types of accounting errors and delays can cause an employee’s account to be underfunded.
- Department fails to process the employee’s withholding to a 401(k), 457(b), ARP, or PST within the required time period, or not at all. (For 401(k) and 457(b) plans, withholdings must post by the first business day following the prior pay period. For the ARP and PST plans, withholdings must post as soon as practicable, but no later than 15 business days after the paycheck was issued that reflects the withholding.)
- Department does not enroll an eligible employee in the 401(k), 457(b), ARP, or PST program as required. In these cases, the error creates an underfunded account in the program that the employee should have been enrolled .
- Department processes an employee withholding amount that is less than what it should be for that employee’s 401(k), 457(b), ARP, or PST account.
Delayed deferrals involving lump sum payments
Current law requires employees to submit their request to transfer lump sum separation pay to personnel no later than five (5) workdays* before separating. Additionally, current year deferrals must deposit into the employee’s account no later than two and one half months after the employee’s separation date.
Employees separating on or after November 1 of the calendar year in which they separated can also defer into the next calendar year. These deferrals must deposit into the employee’s account no later than two and one half months after the employee’s separation date.
Department and agency personnel offices should encourage their employees planning to defer their separation lump sum payment to submit their request to their personnel office 30 calendar days before separating to allow more processing time.
*A workday is defined as Monday through Friday, excluding Saturdays, Sundays, and legal holidays.
Enroll online at www.savingsplusnow.com.
- 401(k) Plan Document
- 457(b) Plan Document
- California Administrative Code, title 2, section 599.945.4
- Government Code section 19993
- Government Code section 19999.3(g)
- Government Code section 19999.5
- Government Code section 20281.5
- Government Code sections 19999.2 to 19999.21
- Internal Revenue Code section 401(k)
- Internal Revenue Code section 457(b)
- PML 2011-042: PML 2011-042 - 11/14/2011 - Underfunded Savings Plus Accounts
- PML 2012-012: PML 2012-012 - 5/31/2012 - Underfunded Savings Plus Accounts
- Savings Plus Now: Savings Plus is the 401(k) or 457(b) plan available to most State of California employees
Project Manager, Savings Plus
Chief, Savings Plus Division