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pam@bbm

Is it a QNEC or MATCH?

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When calculating a QNEC for missed deferrals, is the corresponding match also considered QNEC or is it categorized as employer match.

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in example 3 of Appendix B the third paragraph referring to matching contributions says the employer makes a corrective Nonelective Contribution = to missed match,

so it is a QNEC not a match

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From pre-amble to RP 2013-12:

-Revising Appendix A, section .05, and related examples in Appendix B to provide that, in some cases, a matching contribution owed to a participant may be made in the form of a corrective employer matching contribution, instead of a QNEC, so that the corrective employer matching contribution would be subject to the vesting schedule under the plan that applies to employer matching contributions

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agree, my mind has been on safe harbor plans and if the example refers to a plan that must satisfy 401(k)(12) the examples specifically call it a QNEC in regards to the form of a match

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This is very helpful but I'm still confused on the proper treatment of the corrective match amounts.  

I understand 2016-51 and Tripodi to say corrective matches (in a non-safe harbor plan) are characterized by IRS as "nonelective contributions."  They seem careful to distinguish this from qualified nonelective contributions or QNECs and thus note that the corrective match can be subject to vesting schedule, etc.  However, this also seems to suggest the amount should not be viewed as simply a "corrective match" or added to a Plan's matching contribution account but instead labeled a nonelective contribution.  (There appear to be some prior posts that question how this is handled administratively in plans that don't otherwise provide nonelective contributions--that's not my current case but still seems maybe an open question?) 

These corrective amounts seem to also be called "corrective matching contributions" or "make-up contributions for missed matching contributions,"  and other similar terms but EPCRS seems clear they should be regarded as "nonelective contributions" for IRS purposes.

That characterization seems helpful in that it excludes the corrective amount from ACP testing  thus ensuring that the correction does not require the recalculation of prior ACP test that would have normally included the match had it been made correctly.  That said, this doesn't seem to be treated as a true nonelective contribution because the calculation of the missed match takes into account caps on matching contributions and factors in other matching contributions during the year.  (I understand that because the correction should really be based on whatever match the participant actually missed out on which would factor in the applicable cap on matches.)

But here is the confusion / debate.  In our current case, there was elective deferral failure in early 2018.  The error was corrected very quickly so no QNEC required on missed deferral opportunity but we have to correct missed match.  The failure in one case meant employee receiving large bonus during the period of the missed deferral missed out on deferral and match that would go a long way toward maxing out total deferral and match amounts for 2018.  At time of missed deferral, there were no other matches so full missed match needs to be counted.  Question is what to do about matches for the rest of the year.  Does the corrective nonelective contribution  get treated as a match for purposes of tracking and capping total allowable match for 2018 (such that participant will not get much more in match for 2018) or is participant able to not count the corrective nonelective contribution.  We have conflicting opinions internally.

Thanks

 

 

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Just wanted to bump this up in hopes there is an easy answer to my long post.  Main question is whether the corrective match / nonelective contributions count as matching contributions for purposes of maximum match amounts for a particular year.  In this case, error and correction are all in 2018 so we are trying to determine what to do with remaining matching contributions.  Thanks

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Elective deferrals were not deducted on bonus.  A missed match was processed but the deferrals were not made up. Now client is performing a true up match for the year, Would the true up formula exclude the funding of the missed match?

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