Employee Contributions as QNEC's

[Guest Liosis]

I've encountered a 401(K) plan in which the plan document states that the Employer will make a 3% QNEC for each participant. It also states that if mandatory employee contributions are required as a condition of employment, then those amounts can satisfy the employer's QNEC. The plan adoption agreement sets out that employees, as a condition of employment are required to contribute 3% once eligible, and as such, the QNEC is satisfied by the employee's contributions and the employer does not make any of the contributions for the QNEC. My question is, based on these facts, does the $16,500 employee deferral limitation include the QNEC? For example, can an employee have a year end deferral of $16,500 based on voluntary deferrals and $2,500 based on their mandatory non-elective deferrals for total employee contributions of $19,000 or does the $16,500 apply to total employee deferrals regardless of whether they were elective or non-elective?

Thanks in advance.

[ETA Consulting LLC]

does the $16,500 apply to total employee deferrals regardless of whether they were elective or non-elective?

No. In order for the 402(g) limit to apply, the deferral "MUST" be 'elective'. If not, then it's non-'elective'. The document's language could've been written better, but nothing mandatory can be 'elective'.

Good Luck!