late correction of adp test

[Guest Julie Woulfe]

One of the two methods for a late correction of the ADP test is the one-to- one correction method. This method involves the Employer making a contribution to the Plan equal to the amount distributed to the HCEs. This contribution is then allocated to the NHCEs. In the ERISA Outline Book, there are four ways to allocated this contribution, and all four methods refer to allocating the contribution to participants who were NHCEs for that year. The ADP Test used the Otherwise Excludable Employee rule. Should the one-to-one contribution be allocated only to those NHCEs who were in the ADP Test, or should it be also be allocated to the NHCEs who were excludable from the test?

[Archimage]

I recently performed the same thing. I double checked with counsel on the correct way to do this and they instructed me that it should be done the way the original contribution was allocated under the document. In my case it was a discretionary match that I increased to everyone that deferred and was eligible for the match. This included the otherwise excludables.

[Guest Julie Woulfe]

Interesting....was this additional Match considered a one-to-one contribution (where the additional contribution amount was equal to the amount being refunded to the HCES)? The ERISA Outline Book says that all NHCEs should get a share of this additional contribution.....but it seems in your case that it only went to those who had deferred. In my case, the Employer had not made a match (or a P/S contribution)l.