improper reduction in deferrals

[M Norton]

Client has a 401(k) plan with safe harbor match.

Plan compensation is defined as wages, tips and fringe benefit comp as reported on W-2.

Client paid 2008 Christmas bonuses to all rank and file employees in a fixed net amount ($250), and grossed them up for FICA and Medicare.

No deferrals were withheld from the bonuses.

Then on the last paycheck of the year, some employees' deferrals were REDUCED by the amount of deferrals that should have been withheld from the Christmas bonuses.

So deferrals for a lot of people are incorrect, plus the related SH match - small amounts for each, but sizable for the plan as a whole.

The plan is being audited by a CPA firm.

Does this need to be corrected?

If so, how?

Thanks!