Jeff_pg

The participant's deferral rate was very low (5%?). In late Oct 2020, they submitted their request to raise their deferral rate to 90%. The participant noticed their deferral rate wasn't implemented on Dec 21 2020 and reported it to the employer representative that same day. The rules seem to indicate to me that if the plan sponsor makes the deferral corrections within 3 months of the first missed deferral (early Nov), then the plan sponsor can avoid funding the corrections and the participant must fully fund the corrections. Is that accurate? Should the participant expect these correction to be reflected on their 2020 W-2 despite the fact the actual corrections will be made in 2021?

A colleague of mine found this: "A Plan Sponsor cannot avoid liability to make corrective contributions for the missed deferral opportunity by making its employees responsible for checking pay records to ensure deferral election has been implemented." https://www.irs.gov/pub/irs-tege/epcrs_401k_phoneforum_presentation.pdf Unambiguous.

Thanks for your prompt reply, QDROphile. I didn't mean to imply that the participant didn't follow the appropriate procedure for changing their deferrals. In this case, here's what happened: 1) The participant attended a live web-meeting where the employer representative indicated that the typical method of changing their deferrals was through the recordkeeper's website. However, the website limited the maximum deferral election to 60%. But, the employer representative indicated that if any employee wanted a higher deferral rate, they should call the employer representative and they could arrange a deferral rate as high as 90%. 2) Within days of the live web-meeting, the participant phoned the employer representative and requested a deferral rate of 90%. On the phone call, the employer representative asked the participant to email their request to the employer representative (presumably to create a written request?). 3) The same day as the phone call, the participant emailed their 90% deferral request to the employer representative, who emailed back a confirmation indicating that they had forwarded the request to the recordkeeper, and also said to expect a confirmation from the recordkeeper.

Here are the facts: 1) A participant submitted a written request to their employer to raise their deferral rate. The written request was received and acknowledged by the employer (voice and email). 2) In the acknowledgement email from the employer, they told the participant to expect an email confirmation from the record-keeper. 3) At year-end, the participant realized they never did receive a confirmation from the record-keeping, and their request to raise their deferral rate was not implemented. 4) When the participant contacted the employer, the employer said the participant should have noticed that they didn't receive a confirmation from the record-keeper of their request. Consequently, the employer deems the participant responsible for the mistake, and the employer won't make the retroactive corrections. Who is responsible for the mistake? The participant or the plan sponsor?