Jump to content

Ineligible EE Allowed to Defer – Is Corrective Amendment Allowed


Recommended Posts

In late 2014 a 401(k) plan incorrectly allowed a new hire to immediately start deferring to the plan. Unfortunately the plan has a 1-YOS eligibility requirement. The sponsor's new payroll company made the mistake (not knowingly done by sponsor). The employee is not a 5% owner and did not earn enough to be deemed an HCE for 2015. However, based on their current rate of pay they will be an HCE for 2016 (will most likely earn more than $120K in ’15).

Would a corrective amendment under SCP be allowable since the only affected employee may become an HCE?

I believe an amendment under SCP is only allowable if it affects “mainly” NHCEs. The participant was definitely an NHCE for '14 and '15.

Any thoughts are appreciated.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...