Payroll Oops

[Guest grazetti]

We have a plan that has 2 locations. A participant moved from one location to another in January 2005. When she moved, the payroll company forgot to enter her previous deferral % (3%) into their system. Therefore, she did not have deferrals and therefore the company match as well for over a year now. (She just realized this when she went to file her taxes!) Under the plan's matching formula, she would have received a match of 1.5% of compensation.

According to what I have been able to find, the suggested correction is for the employer to make a QNEC equal to the ADP and ACP of the NHC's for the year. However, the ADP for the NHC is 3.68% and the ACP is 1.57%.

It doesn't seem fair that she would receive more in contributions than she would have if the mistake had not been made.

Any comments or suggestions?

[QDROphile]

You need advice about correction procedures and options from someone with enough knowledge and experience to apply the guidance to particular facts and circumstances. While some corrections are strictly prescribed, the IRS procedures provide flexibility. I think the most you can expect from this board is a pointer to the guidance you found already. You may pay more for help in supporting your affection for fairness than it would cost to follow established convention. There are various other posts related to your subject, with various positions about what ought to be the result.

[stephen]

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