If you contributed to a 401(k) plan at work and received a refund for a portion of your contributions, then chances are your plan failed Internal Revenue Service compliance testing.
IRS guidelines require 401(k) plans to meet certain criteria known as “annual contribution percentage” and “annual deferral percentage” to determine the amount participants are able to contribute.
The reason a person receives a 401(k) refund check is most likely that the employer’s plan has failed one or both of these tests, which prevents the employee from contributing above a certain amount. And that occurs when eligible participants in the company’s 401(k) plan are not contributing enough of their income, and employers are not contributing a significant enough amount on the employees’ behalf, either.