What is the missed deferral opportunity when the improperly excluded employee was the only NHCE?

[Guest TaxedToDeath]

A small plan improperly excluded an eligible employee who was an NHCE. He was the only NHCE; all other employees and participants are HCEs.

When calculating the missed deferral oppertunity under EPCRS, Appendix A, .05(2)(b) indicates that the missed deferral opportunity is determined by multiplying the ADP for the year of exclusion for the employee's group in the plan by the employee's compensation for the year of exclusion.

But in this case there isn't anyone else in the employee's group because he is the only NHCE, so how do you determine what the ADP for his group would have been? Do you assume 3%, since that seems to be a favorite assumption for other portions of Appendix A? It surely cannot be zero....

[Jim Chad]

FWIW. I would use 3%.

[BG5150]

Did they not include him by not letting him sign up, or did they not include him by not implementing his election?

[Guest TaxedToDeath]

Did they not include him by not letting him sign up, or did they not include him by not implementing his election?

Assume for this hypo that the employee did not sign up and had no election.

[BG5150]

Then I'd probably assume 3% NHCE deferral.

No cite, but seems like the way to go.

[Kevin C]

What's the match formula? For example, if the match is 100% on deferrals not in excess of 6%, I don't think I would be comfortable trying to argue that using a missed deferral of 3% is reasonable for the lone NHCE who was improperly excluded.