Deferral not taken out of pay for 2010

[Guest sugar daddy]

A plan has several participants who in 2010 received taxable wages however deferrals were not with held from this pay.

1) Can the employer go back and with hold it and deposit it? Would this not involve amending those participants W-2's as well as calculating and paying excise taxes on what those deferrals would have earned.

2) Would a VCP filing have to be made?

Thank you

[QDROphile]

The failure would have to be corrected under EPCRS and I doubt that either current or retroactive "withholding" would be acceptable.

VCP is not necessary if the conditions for SCP are met depending on you view about SCP. Some people are SCP-phobic unless a prescribed fix in Rev. Proc, 2008-50 fits exactly. The IRS has informal guidance on its website about acceptable correction of disregarded deferral elections. The guidance is different from the guidance in Rev. Proc. 2008-50 concerning overlooked participants.

[Guest sugar daddy]

I should probably add, they were allowed to defer on most wages, just a certain type of pay (i.e. overtime) was not deferred on. Does the plan sponsor have to go back and pay 50% QNEC on their deferral election plus what it would have earned/lost?

[QDROphile]

What does the fix-it guidance say?

[Guest sugar daddy]

50% QNEC plus attributable yield. This is an SCP case since the amount is miniscule compared to the total plan assets and the number of participants affected. When calculating the 50% QNEC there are a few participants(13 to be exact) that would be due a QNEC of less than $10. 8 less than $1. Would you consider those amount negligible and otherwise not necessary for funding purposes?