Can EE make up deferrals not taken?

[Guest Bear]

I have a plan where it was discovered that an employee made an election of 20%, but the company's payroll system did not deduct for all of 2008. Employee never noticed that the money was not coming out.

Does the employee have any ability to make up those contributions? Or is the only fix through the company making a QNEC equal to 50% of the missed opportunity plus match?

Also, is there any time period in which the employer's liability is capped, meaning that they are responsible for 6 months since the employee did not notice their deferrals were not being taken out?

I could not find anything that states an employee is or isn't allowed to make up contributions for their own purposes to get a deduction.(again, not sure if they even could now that 2008 has passed).

[K2retire]

Does the employee have any more 2008 paychecks from which to make them up? It seems unlikely at this date.

[QDROphile]

You could ask if the IRS would approve the correction under VCP.

[Guest Sieve]

2008 is gone, so employee can't fix since 2009 deferrals can't count towards 2008. Employee can increase 2009 deferrals to make up the difference (as long as 2009 $ limits are not exceeded), but, at 20%, I suspect that doubling up will cause 2009 limits to be exceeded. Of course, if this person's an HCE, doubling up in 2009 will have siginificant ADP consequences.

Employer remains on the hook for not following plan terms, so EPCRS correction is always available. Still, I'd first talk with employee to see if increases for 2009 deferrals might make more sense.