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ADP test failed, was corrected, then failed again....

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I am looking at a non-safe harbor 401k plan that failed the ADP test (passed ACP) in 2017 and 2018.  Only 1 of the 3 HCEs were required to take money back and that was done each year.  About 15 total participants are shown in each years ADP test.

However in reviewing that plan now, it seems that from 5-10 non contributing eligible NHCEs were left out of the tests.  Adding them back in will make the test fail even worse.

Can we have the employer make a QNEC for these past years even through we already made a distribution of the excess to the one HCE?  Or do we have make an additional payout to the HCE since we already made what would be a partial refund?   

Thank you for any replies

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I think your answer lies in EPCRS.

The sponsor has two options:

Make a QNEC on behalf of the NHCEs at a level that makes the test pass --OR--

Do a refund and also contribute a QNEC in the amount of the gross refund.

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Maybe you've already done this, so just a caution.  Those previously omitted NHCEs were omitted for a reason.  Double-check to make sure whether that omission might have been correct.  OK, it might be a stretch, but it's worth looking first.

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