Correction of exclusion of eligible HCE from 401(k) Plan when no other

[Guest CTYSON]

Any ideas for how to correct failure to enroll an HCE in a 401(k) Plan when there were no other HCE's? Correction would be to give QNEC equal to ADP of employee's group. ADP of employee's group was 0 since no other HCE's. Employee was subsequently enrolled at next entry date (in different plan year) and deferred 4%.

[Richard Anderson]

Section 6 of Rev Proc 2000-16 provides "correction principles and rules of general applicability." The correction should be reasonable and appropriate and should resemble if possible one already provided for in existing guidance.

Either providing the HCE with a QNEC in the amount of ADP of the only group (NHE), or providing a QNEC of 4%, since that is what he elected in the next year, might be considered "reasonable and appropriate."

I would not be comfortable with any correction in this instance without submitting under VCR to get IRS blessing.

The IRS might tell you to "find" his election form, where he elected to defer zero.