One-to-One Correction

[12AX7]

The correction is being done for the 2007 plan year. In 2009, there are no NHCEs employed. Does the employer luck out in not having to make a contribution? Almost seems too good to be true!

[Guest Sieve]

Intuitively, I would think that the non-elective contribution correction method (EPCRS, Appendix A, .03) should be used since there are no NHCEs available when using the one-to-one correction method of Appendix B. Or, alternatively, you should allocate as a one-to-one correction to those who were NHCEs in the year of the failure (EPCRS, Appendix B, Section 2.01(1)(b)(iv)(B)(1)(I)), rather than any of the other one-to-one alternatives. I base this conclusion on the following EPCRS language: "The correction method for failures relating to nondiscrimination should provide benefits for nonhighly compensated employees." (EPCRS, Section 6.02(2)©.)

Yet, perhaps the one-to-one solution, as you propose it, is OK, based on this EPCRS language (which appears, in your situation, to contradict the prior quoted language): "For Qualified Plans, any correction method permitted under Appendix A or Appendix B is deemed to be a reasonable and appropriate method of correcting the related Qualification Failure." (EPCRS, Section 6.02(2).

Take your pick. Personally, I would advise abiding by the "give the NHCEs some $$" rule/provision.