Correction of Failure to change deferral amount.

[Archimage]

An employer has failed to change deferral elections as requested for eligible participant. In order to correct this I believe the plan sponsor will need to do the following:

1. For participants that chose to increase their % the ER should contribute a QNEC in the amount of the difference plus earnings for those affected.

2. For participants taht chose to decrease their %, the option I would recommend is to forfeit the applicable deferrals and earnings and make the employee whole outside the plan.

In calculating earnings, I am assuming the Annual Fed Rate can be used.

Have I missed anything or incorrect in my thinking?

[Harwood]

If mostly Non Highly Compensated, I would use the best performing fund in the plan, not the Federal Rate [unless it outperformed the best fund]. Or, you can take the time to look at the investment gain/loss rate for each individual.

When taking money away: allow Participants to keep the gain. If they suffered losses, reduce the forfeiture by the amount of the loss.