Employer failed to apply Universal Availability

[Guest sugar daddy]

a small employer (less than 20 employees) has been using an age and service requirement for their 403(b). I understand this is an operational failure under 403(b)(12)(A), but what is the correction principle? I believe the employer would have to retroactively contribute on behalf of the employee who was not allowed to defer for a year, but what is the standard amount, if any? Is it the same as a 401(k), where you take 50% of the pre tax deferrals the employee would have made had the employee been timely included in the plan based on "lost opportunity cost"?

[PensionPro]

Correction for a universal availability failure generally includes giving each excluded eligible employee the opportunity to participate. The organization must also make employer contributions to restore improperly excluded eligible employees’ lost opportunity to make salary deferrals. An organization’s failure to correct the error could result in the loss of favorable tax benefits for the plan and the employees. The correction is made under EPCRS, so the missed deferral opportunity is equal to 50% of the employee’s “missed deferral.”

[Guest sugar daddy]

Correction for a universal availability failure generally includes giving each excluded eligible employee the opportunity to participate. The organization must also make employer contributions to restore improperly excluded eligible employees’ lost opportunity to make salary deferrals. An organization’s failure to correct the error could result in the loss of favorable tax benefits for the plan and the employees. The correction is made under EPCRS, so the missed deferral opportunity is equal to 50% of the employee’s “missed deferral.”

Pension Pro, is the employer contribution 50% of the NHCE ADP? For example if the plans NHCE ADP was 5%, then would the participant receive a 2.5% employer contribution of their income for the period they were not allowed to defer? Thanks

[PensionPro]

Correction for a universal availability failure generally includes giving each excluded eligible employee the opportunity to participate. The organization must also make employer contributions to restore improperly excluded eligible employees’ lost opportunity to make salary deferrals. An organization’s failure to correct the error could result in the loss of favorable tax benefits for the plan and the employees. The correction is made under EPCRS, so the missed deferral opportunity is equal to 50% of the employee’s “missed deferral.”

Pension Pro, is the employer contribution 50% of the NHCE ADP? For example if the plans NHCE ADP was 5%, then would the participant receive a 2.5% employer contribution of their income for the period they were not allowed to defer? Thanks

The IRS recognizes various ways in which the make-up contribution to the employees may be calculated. One of the most common methods is 50% of the ADR of similary situated employees (HCEs or NHCEs) as you outlined. In lieu of calculating the ADR, an employer may deem the ADR to be 3% and make a fully vested contribution of 1.5%.

[Guest sugar daddy]

Under a VCP filing would you think that amended 5500 returns would be required for each year the failure occurred or the sponsor could reflect the correction under the current plan year? I'm thinking the latter.