One to One Correction Method

[Guest tjt169]

Plan failed 2005 ADP testing and we are now just correcting it. Client has chosen the one-to-one method as their correction method.

Total refunds due are $10,000.

Employee A is due a $2,000 refund.

Employee B is due a $3,000 refund.

Employee C is due a $5,000 refund.

Earnings are calculated and

Employee A refund is $2,200 ($200 earnings)

Employee B refund is $3,500 ($500 earnings)

Employee C refund is $4,700 (-$300 in losses)

Now we have to calculate how much the QNEC should be. In Appendix B - Section 2.01(1)(b) it says that the same dollar amount (adjusted for earnings) is contributed to the plan.

So do you think it should be $10,700 (only taking into consideration the positive earnings) or $10,400 (netting all earnings)?

After reading in the EPCRS, Appendix B - Section 2.01(1)(b)(IV)(A), it says that the employer makes a contribution to the plan that is equal to the aggregate amounts distributed. I think that means we could net out the negative earnings and the QNEC would be for $10,400.

Also, if all three had negative earnings, could the QNEC be less than the $10,000?

Any other thougts?

Thanks in advance!!

[Tom Poje]

while example 1 of the same section doesn't discuss 'negative' earnings, I'd say it is implied.(but then what do I know)

the correction method simply says earnings - which could be positive or negative.

actually see 6.02(4)(e) which for other corrections says ...... earnings (including losses)