When was the last time you checked your pay stub? I’m not talking about your gross pay or net pay, I’m talking about the withholding for social security, service year credits for your pension plan, and all other administrative accounting that takes place with your employer.
The following story is an unfortunate reminder of how important it is for you to be aware of all the administration that your employer does on your behalf.
The Story of the Missing Contributions
Five months ago a family member of mine retired from the federal government, after over 30 years of service.
In the year leading up to her retirement, she ran the numbers and reran the numbers to make sure she felt comfortable with the retirement benefits from the federal government. (Did you know there is a parallel system for federal employees somewhat similar to the Social Security program that the rest of us have?)
Administrative error. Unfortunately, there was an error from over 30 years ago. Her employer forgot to withhold her portion of the retirement funds for her first few years of work. Now, when her pension is calculated, they are excluding those years of work from her record.
So what’s the problem? You don’t contribute, you don’t get the benefit, right? Well, that would be the case for a defined contribution type plan (like a 401k), however, this is mandatory withholding (just like Social Security). You can’t opt out of it.
Notification. And the double whammy, was that she even notified her personnel office 15 years ago about the mistake. She offered to send them the withholding plus interest, to make her account right. They looked into it and said that because she never left the service, it was fine and the years of service would be included.
Fast forward to today. Five months into retirement, and there is no answer. Multiple people have reviewed the case, and no one has offered a solution. She is receiving temporary benefits for a fraction of the pay until they can decide how to correct the problem. Unfortunately, when you enter retirement, you depend on those payments. Luckily she has an emergency fund to get her through it.
Lessons for All of Us
Mistakes Happen. Even though social security or federal retirement is mandatory, your employer can make accounting mistakes. When was the last time that you double-checked the numbers?
You are the one who will be hurt. You will be the one hurt in the end for loss of service, not your employer. And believe me, the only one looking out for you is you!
Get everything in writing.The final lesson learned is to get everything in writing. If there was some documentation of the conversation 15 years ago, it might have helped speed along the correction (…or maybe not.) It’s always good to have written documentation of any decisions made by others that could affect your future.
Look for missing money. Search the list of unclaimed money by person name to see if some of you lost some of your pension money.
I’m just as guilty of only checking that my gross pay is correct, and the amount of vacation or time off is accurate. I never would have even considered checking the FICA numbers. Pull out your last paycheck and verify the following:
- Medicare: 1.45%
- Social Security: 6.2% (Up to the maximum of $102,000. In 2009, the maximum is $106,800.)
Other things to double check that you might see either on your paycheck or on other correspondence from your employer that could affect your retirement:
- Years of service
- Hire date
- Employer contributions on your behalf to pension plans
- Employer matches on your 401k plan
- Vested percent
If you find an error, contact your HR department immediately and insist that it be corrected. Your future self will thank you!