ONE TO ONE QNEC

[Guest moltengater]

Company A has a 401(k) plan. For 2004 the employer submitted the December 2004 contribution with a January 2005 paydate in error. This was just recently discovered and we have gone back and re-tested the plan for 2004. The plan already failed ADP and ACP testing but now the refunds would be higher by $300. Since we are past the 12 month correction period we were going to correct using the one-to-one correction method under SCP.

It is my understanding that because the plan uses prior year testing so the QNEC would go to the eligible 2003 NHCE's.

The problem is when we allocate the $300 QNEC it results in contribution ranging from $0.10 to $7.00 and a large number of these participants have left the company.

Do I have to allocate this way - it does not seem appropriate to create 50 participant accounts for which the client wil be billed and go through all the work to pay out such small amounts. Is there any kind of deminimus amount provision for this? Any ideas on correctioning the problem?

[jquazza]

When using the 1-to-1, you have the option to allocate the QNEC only to the NHCEs who are still employed at the time of the correction.