Missed Deferral Opp in a Safe Harbor Plan & Timely Correction

[Rai401k]

Employer failed to withhold on Group Term Life Insurance Premiums. The definition of compensation under the plan is W-2 and the client has stated that these amounts are included in each persons W-2. The plan is an enhanced safe harbor match 100% up to 5%

1. Based on our understanding of EPCRS the employer is required to fund a QNEC for 50% of each participant's election percentage. However the safe harbor match for the missed deferral amount should be based on their entire election percentage and not on the corrective QNEC amount. Is this correct?

2. The client has not included this compensation for 7 years going back to 2007, based on our research you can only self correct going back 2 years. However there is a section that we read that states if the mistake is insignificant you can go back more years. The GTL amounts that the client wasn't including as part of comp were very small amounts. The most would be $300 for a participant, therefore the QNEC and match that would be funded would be minimal amounts. Do you agree that this is considered an insignificant error and the plan could self correct all 7 years and not go to VCP?

[BG5150]

From EPCRS on whether or not an error is insignificant

.02 Factors. The factors to be considered in determining whether an Operational Failure under a plan is insignificant include, but are not limited to:

(1) whether other failures occurred during the period being examined (for this purpose, a failure is not considered to have occurred more than once merely because more than one participant is affected by the failure);

(2) the percentage of plan assets and contributions involved in the failure;

(3) the number of years the failure occurred;

(4) the number of participants affected relative to the total number of participants in the plan;

(5) the number of participants affected as a result of the failure relative to the number of participants who could have been affected by the failure;

(6) whether correction was made within a reasonable time after discovery of the failure; and

(7) the reason for the failure (for example, data errors such as errors in the transcription of data, the transposition of numbers, or minor arithmetic errors).

No single factor is determinative. Additionally, factors (2), (4), and (5) should not be interpreted to exclude small businesses.

(I added carriage returns)

Sounds like 1 & 2 are non-factors. 3, 4 and/or 5 might be relevant. Hopefully 6 is not. 7 might be.