401(K) Corrective Contribution and General Testing

[Guest geschaft]

A employer failed to offer a participant the option to make deferrals during the 12/31/06 Plan Year. The employer plans on making a corrective contribution (SR and MT) to the plan on the employee's behalf, in the form of a QNEC, following the example under EPCRS. The plan is cross-tested; could this corrective contribution be included in the general test?

[Tom Poje]

I vote no based on Appendix A .05(2)(f)

.05(2)(f) says you can't use the correction methods for failure to include an eligible employee until after correction of ADP/ACP failures.

since ADP/ACP are nondiscrim tests, and cross test is the 401(a)(4) version of the nondiscrim test, I would assume similar logic would apply.

run all tests first, correct them as needed, then fix problem dealing with failure to include eligible employee.

That might not be correct, but at least it seems consistent with EPCRS logic.

[Guest geschaft]

I vote no based on Appendix A .05(2)(f)

.05(2)(f) says you can't use the correction methods for failure to include an eligible employee until after correction of ADP/ACP failures.

since ADP/ACP are nondiscrim tests, and cross test is the 401(a)(4) version of the nondiscrim test, I would assume similar logic would apply.

run all tests first, correct them as needed, then fix problem dealing with failure to include eligible employee.

That might not be correct, but at least it seems consistent with EPCRS logic.

Thank you.