Jump to content

Epcrs Correction for 3% SH with Non Safe Harbor Match


Mr Bagwell

Recommended Posts

Plan is safe harbor non elective with a 100% of 2% non safe harbor match.

A rehired employee was not giving the opportunity to defer for 2017.

I know that the fix for the deferral piece is 50% of the 3% plus the 3% safe harbor.

My dilemma is the match piece.  If my brain is working correctly, I understand the regs to be... 2% match.  The employee's missed deferral was 3% (because of safe harbor non elective) so the match is 100% of 2%.

Can I get a confirmation or denial?

Thanks

Link to comment
Share on other sites

Is the fix for the deferral piece really 50%? Aren't you eligible for the reduced 25% QNEC under Appendix A, .05((9)(b)? Agree that the match is 2%.

Hmmm - as I think about this, it seems debatable. There appears to be an odd technicality in this - whether intentional or oversight I don't know. So under .05(9)(b), it allows the 25% QNEC in lieu of the higher QNEC required under .05(2)(b) or .05(5)(a). Under .05(2)(b), that section is specifically NOT for plans using a safe harbor, where a participant was not provided the OPPORTUNITY to defer. This might lead you to believe that for a safe harbor plan where no OPPORTUNITY to defer was given, that .05(2)(d)(i) controls, which is the 50% QNEC, and .05(2)(d)(i) isn't referenced under the .05(9)(b) correction.

.05(5)(a) is for situations where someone made an election where it wasn't implemented properly.

So under a very literal reading of .05(9)(b), it appears that that you could use the reduced QNEC correction for situations where an election wasn't properly implemented, but not for a situation where someone wasn't given the option to defer.

This makes no sense to me, since you must give the full match anyway, even under the reduced QNEC correction in .05(9)(b).

Anyone have any thoughts on this? I almost think this may have been discussed/debated a while back, but I can't remember.

Link to comment
Share on other sites

think the safe harbor is applicable where an election wasn't properly implemented or for a situation where someone wasn't given the opportunity to defer. Rev. Proc. 2015-28 incorporated into 2016-51 defines an Employee Elective Deferral Failure as a failure to implement elective deferrals correctly in a 401(k) plan or 403(b) plan, and a failure to afford an employee the opportunity to make an affirmative election because the employee was improperly excluded from the plan.  I think where it gets tricky is in the notice.  You are providing the notice within 45 days of correct deferrals beginning.  You can include language that states the deferrals have begun (or will begin shortly).  I think in this case you may want to include the notice prior to starting deferrals to give them an opportunity to opt out or change their deferral percentage.

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...