ECPRS correction procedure - crossing tax years

[Guest andrea16]

I have a grandfathered gov. 401K plan that is developing correction procedures for correcting incorrect deferral amounts when the correction would cross tax years. For example, in November an employee changed their monthly deferral from $1100 to $1499 in an effort to max out their 2005 deferral limit and we implemented the change for $1149 until notified by the employee in February. Thus, they did not max out their 2005 deferral due to our error.

Our procedure has been to correct the error going forward and increase future payrolls by the shortage amount, as directed by the employee. However, this correction procedure would not make the employee, in the example, whole (becuase they were not able to max their 2005 deferrals and will not be able in 2006 to "make-up" 2005 deferrals - unless 414(v) applies).

Although the EPCRS correction procedures do not address administrative errors, we want to model our administrative correction procedure on those under EPCRS. However, given that the employee is a cash-basis taxpayer and the error is corrected in the following tax year, I think this would preculde us from correcting the tax reporting to show the employee maxed out their deferral amount. Under EPCRS 6.02 or other available guidance, is there any permissible way to make a full correction for this type of administrative error?

Any thoughts would be greatly appreciated.