Missed Deferral

[ERISA-Bubs]

We missed a deferral in one paycheck. Can we make it up in the next paycheck?

I know under Notice 2008-113 it is a failure to pay compensation that should have been deferred. There is a special procedure even if the failure is caught and correctd in the same year. However, the examples for that correction involve bonuses--a one time payment. So, clearly, if an amount is not deducted from the bonus, a one time payment, there is a failure. However, in our case we're looking at regular compensation. We will still be deducting from compensation, just a couple weeks later than we normally do in practice.

Do I have an argument here?

If so, does my argument go out the window if the plan or the election form specifies that deferrals will be made proportionally on each paycheck?

[masteff]

So what do you mean by "missed"? What this a new enrollment or was it being deducted and suddenly on one payroll it failed to come out?

I strongly believe in boilerplate language that enrollments and election changes may take 1 to 2 payperiods to take effect. It covers a multitude of unforeseen mess ups.

Since you don't have the bad luck of the error being on the last paycheck of the year, I know that I would deduct the amount from the next paycheck and then do a manual correction for any missed employer match.

As to the "deferrals being made proportionally" language... that simply means you're not taking a huge lump deduction starting on January 1st based on annual comp. I wouldn't overthink it.

[ERISA-Bubs]

This is not the case of a new enrollee. This person is a participant whom we have deducted a deferral from each paycheck and one paycheck was missed. We plan to make it up by deferring double from the next paycheck, if we can.

A conservative reading would be this is a missed deferral that is being corrected later in the year. It could be corrected under 2008-113.

A more realistic, and I think defensible approach, is that the participant elected 10% deferrals from regular compensation and that is what he is getting, even if not perfectly proportional in each paycheck.

From your answer I understand that you think the second approach is fine. Do you think there is any risk here?