Operational Failure / Bottom-Up

[fiona1]

Let's say a plan fails their 1/1/2005 to 12/31/2005 ADP/ACP test. They have until 12/31/2006 to make a correction - whether that is in the form of a QNEC to the NHCE or refunds to the HCE's.

Now, let's say that they DON'T make a correction by 12/31/2006. So now the plan is in an operational failure.

One option is the Self Correction Program. There is the One-to-One correction method described in Appendix B of Rev Proc 2003-44. And there are some other options described in Appendix A.

The Bottom-Up QNEC is not a safe harbor correction method, but let's say that this plan want to use this method to correct their operational failure.

The Final regulations just limited Targeted QNEC's (including the Bottom-Up) to the greater of 5% or twice the plans representative rate.

Since this doesn't go into effect until the 2006 plan year, does the plan have to limit the Bottom-Up QNEC when correcting the 2005 ADP/ACP test?