QNEC for HCEs

[Übernerd]

Several years ago, an employer used the wrong 415 limit to calculate contributions for two HCEs; it therefore undercontributed to their accounts. It would like to use QNECs to self-correct under EPCRS (under § 6.02(4)(b), such corrective contributions relate back to the yeart they should have been made and therefore aren't annual additions in the year they'reactually contributed).

EPCRS requires the employer to amend the plan to permit such QNECs--but all the guidance I'm finding on such amendments relates to correcting nondiscrimination errors and therefore doesn't apply to these HCE-only contributions. Is there necessary language for such an amendment, or can it just provide that the employer can, at its discretion, correct operational failures with QNECs?

[Guest Midas]

Ubernerd - I agree if you make a corrective allocation due to failure to make a required allocation for a previous year, it is treated as annual additions for the year it pertains to. The question is, was the QNEC required? If the required allocation was an employer non-elective or an employer match, then that should be the required corrective allocation.

When QNECs are used to correct prior years ADP/ACP failures, the QNECs are not considered required and are therefore counted as annual additions in the year they are made, not the year they are made for.

Also, keep in mind, Self Correction can only be made within two years of plan year end in which the operation failure occurred.