Missed Deferral where ADP is 0%

[00hskrgrl]

Client fails to put an employee in the 401(k) plan in 2011 (misunderstanding of eligiblity). There was 1 full-time NHCE in the plan and deferring for many years. In 2011, however, this 1 NHCE didn't defer, so the ADP for the NHCE group is 0.00% for that year. If I'm reading EPCRS correctly, I use the ADP results for each year, so for the 2011 plan year, the corrective contribution would be $0.00. Sound right?

[Kevin C]

For a non-safe harbor plan, it does say you can use the ADP for the respective group to determine the correction. However, I would not be comfortable using 0%. I think a better option would be to use the correction method for a safe harbor plan and calculate the correction using a 3% missed deferral rate.