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Payroll/Benefits Errors: Co-incidence, Laziness, Incompetency or What?

I have been working in finance/accounting for more than 5 years but have never seen anything like this before. Was wondering if this is just a co-incidence, laziness, incompetency or some conspiracy? what do you think??? Have a very interesting case/mystery to share. One of our employee's requested pre-tax deductions of approx $500 per pay check for his HSA account. One of those deductions were deducted from his paycheck but was never deposited into his HSA account. The process of deduction and depositing is obviously conducted by our benefit/payroll and the bank. He reported the case to payroll. It took them ONE YEAR to retrieve that money and reimburse him. During this time he was following up on this he was told by the benefits department that they are working diligently and it was very complicated to get money retrieved. To top it off, as soon as he was reimbursed for this error (remember it took them one year), another deposit (of $450) was missed to be deposited in his HSA account. He reported it to payroll/benefits department again and i believe it has been four months so far and exactly the same thing is happening with him again. Payroll/benefits department is again telling him that they are working with the bank diligently but still are unable to trace why the deposit was not made and not sure where that money went. So as i said stated above, was wondering is this a co-incidence, laziness, incompetency or some conspiracy? what do you think? By any chance are Payroll/benefits department holding this money (and may be money of some other employees as well) to hide their errors or unbalance numbers??? Was just wondering. Honestly, i have never seen something like this before. Any thoughts???

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

A week, maybe two, but 1 year or 4 months - incompetence (maybe criminal)! Especially (and this is a crucial fact) your employee was following up. So maybe they missed or forgot about the issue the first time, but not the second, third, etc.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

Time for an audit.

Anonymous
(Financial Analyst) |

I have suggested he file a formal complaint with HR.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Time for the CEO to get involved...

Anonymous
(Financial Analyst) |

By any chance is this possible that the payroll/benefits are periodically holding money of different employees to cover some error / variance in their balance sheets? Otherwise why would they hold anyones $$$ for so long.

Topic Expert
Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Anon
Here is a phrase from the 60s and 70s...it does not have to be limited to customers payments though.

Teeming and lading is a bookkeeping fraud also known as short banking , delayed accounting and lapping. It involves the allocation of one customer's payment to another in order to make the books balance and often in order to hide a shortfall or theft.

Anonymous
(Financial Analyst) |

This is ridiculous if they are doing this in our multi-million dollar organization and causing financial and mental trauma to their own employees. Whats the best way to handle these people; reporting to CEO, CFO, Controller, Internal Audit Department or personal lawyer? Thanks

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Playing with payroll is very naughty.... The Dept of Labor (both Feds and States) are extremely pro-active, as is the US and States AG's and local DA's.

Try internal first, then....

Topic Expert
Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Anon-another thought...
Is there a Whistleblower process in place and can it be trusted?
What about Internal Audit?

Anonymous
(Financial Analyst) |

Thanks all... i will ask my friend to do so

Lisa Tancredi
Title: Chief Financial Officer
Company: Napoli Shkolnik PLLC
(Chief Financial Officer, Napoli Shkolnik PLLC) |

Not sure how your company has its HSA set up. We have a separate bank account for HSA. On a weekly basis, based on the payroll report, Finance sweeps the pretax deductions from the payroll bank account and deposits the funds to the FSA account. The FSA provider withdraws the funds as they pay claims. Finance runs a report from the providers system by employee and reconciles the cash deducted to the liability. After the year is completed we either have a gain or loss and fund the account accordingly for following year.

Anonymous
(Financial Analyst) |

Hi Lisa
Ours is different. We have to open a bank account. Then we request payroll/ benefits department to start deducting funds from our paycheck and deposit in that separate bank account. The money accumulated can be used by using a debit card. The money rolls over. We can request increase or decrease in deduction any time.
In my friend's case, the money was deducted from his paycheck but was never deposited in his bank account to be used for his medical expenses. And it took him one year to get that money back.
Our HR kept telling him that they have sent the money to bank and bank would tell him that they have not received any. so i just wonder where is their check and balance, what about their balance sheets reconciliations etc etc

Anonymous
(Special Project Coordinator) |

HSA accounts and funds are owned by the employee. FSA accounts are owned by the company and funds are co-mingled. Sounds like HSA account issue may be an issue with bank routing/account number/account name. In this day of fraud, if all those items do not match, the bank may not accept the payment. Or the payment may go into suspense or get kicked back to the initiator of the transaction (the company). Or someone within the company is committing fraud......

Anonymous
(Financial Analyst) |

I believe this is exactly whats happening. My colleague has drafted an email and is sending it to controller and CFO today. Will be interesting to see the outcome.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

That may be the cause behind the issue, but it doesn't answer the question of 1 year of failing to correct the problem!

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

The routing/acct/name mismatch is possible but UNLIKELY. Remember, the problem credit occurred after so many credits have gone through. That is like saying your direct deposit payroll may or may not go through after a year of deposits.

For the suspense account, banks are directed to resolve suspense accounts ASAP. For it to stay that long in suspense accounts is possible but again unlikely.

As for getting kicked back to the initiator, I would think that reconciliation for the accounts are being done by a separate unit of the company and not just HR.

Anonymous
(CFO) |

We had one instance where the payroll supervisor sorted the HSA spreadsheet and didn't include all of the columns and so the full deposit went to the bank, but the deposits to each of the employee's accounts were wrong. Because the HSA was new, employees were watching their account balances and somebody noticed and let payroll know. It took a couple of weeks to get the balances sorted out with the bank. The supervisor was super embarrassed and this has never happened again. My point is that mistakes do happen, but there is no way it should take a year to fix and should never happen again because the process should be changed to reduce the possibility of a future error once an error happens.

Steve Rabin
Title: CPA
Company: Steve Rabin CPA
(CPA, Steve Rabin CPA) |

For the typical entities I work with, <500 employees, payroll and benefits are outsourced to huge payroll providers with SOC-1 controls and I have not seen problems like this. In your case I wonder if the bank account number and routing number were somehow garbled, and the delay was over legalities of retrieving the money from a strangers account? I have seen that happen in other contexts (in particular with BoA).

Anonymous
(Financial Analyst) |

My friend received his deposit in HSA from the previous and the next payroll deductions but not the one in the middle. So i dont think this may be the possibility. Our organization is under the state government and the HSA deposits go thru the state HR, i.e. our payroll deduct the $$ and send it to the state HR and they deposit it into the bank.

Bank acc and routing numbers should not be an issue in this case as the deposit before and after were made successfully.

Anonymous
(Financial Analyst) |

Another very interesting points i would like to share;

1. The HSA for our organization runs from Jan to Dec. The refund he received from payroll was on the very next paycheck after Dec 31st. This really made me think that there is something wrong. So most probably they were waiting for books/accounts to close and to manipulate the numbers... just a thought...???

2. The second error, where they again failed to deposit his deduction into his HSA account, was right after the 3 pay period paycheck. ie, when you have three pay periods you dont see these deposits in your HSA account for ONLY one paycheck but the next one your will have the deposit. So to mask the error/fraud they used the paycheck cycle right after the 3 pay period paycheck.... i hope i am making sense... again just a thought...?

These two things really made me think that they are doing something wrong with my colleague/friend.

Anonymous User
Title: CFO
Company: Local Government Agency
(CFO, Local Government Agency) |

Take it from a CFO who oversees a payroll that involves HSA employer contributions: They aren't manipulating anything. They are just incompetent.

It is very difficult to make post deposit changes for HSAs. BTDT.

Donna Bradford
Title: CFO
Company: Saving Sight
(CFO, Saving Sight) |

I agree time for an audit- sound like fraud to me

Joan Green
Title: VP Finance
Company: National Counseling Group
(VP Finance, National Counseling Group) |

Whether it is fraud or incompetency, it is still wrong and needs to be addressed. It is not acceptable. Keep an open mind and fix the process; involve vendors (bank) if you need.

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