Twist on missed deferrals

[pmacduff]

Participants became eligible as of 04/01/2013 and began 401(k) & roth contributions at that time.

Employer changed payroll companies some time in May, 2013.

New payroll vendor DID continue deductions for a few weeks and then abruptly stopped on four participants. (one actively enrolled and three auto enrollees)

Fast forward to now. Employer discovers this issue (none of the 4 participants has noticed or brought this up to the Employer as of yet).

So....a year has passed. The Employer must provide the 50% QNEC for these participants as well as the match (which is allocated and deposited annually at year end), yes?

The participants have been receiving quarterly statements but I seem to recall as much as we might like to think the participants bear some responsibility after this amount of time, the onus is still on the Employer to properly correct.

Also is it really the 50% QNEC - wouldn't I use the participants' actual contribution percentage since we know that?

Additionally I believe the Employer needs to correct the 2014 year-to-date as well with the QNEC?

[Kevin C]

The employer is not required to use the EPCRS correction methods. See Rev. Proc. 2013-12, Section 6.02(2). The correction methods listed in the Rev. Proc. are deemed to be reasonable corrections. Other correction methods may also be appropriate, but that is a facts and circumstances determination.

[Belgarath]

I completely agree with Kevin. FWIW, from my own perspective, I think you are far less likely to have problems during a plan audit if you have used a "pre-approved" method - and if the dollar amounts are small, I personally wouldn't mess with going outside an already pre-approved method.

[pmacduff]

The dollar amounts are small. It doesn't change much either way but the participants get a bit more if I use the actual NHCE ADP per the pre-approved method as opposed to using the participants' individual percentages. Just trying to save the client $$ as it appears this was not their fault and the payroll company is not stepping up.

[MoShawn]

I would think you would use the rates the participants elected/were defaulted to. Treat it as a failure to implement an election rather than a failure to give an opportunity to elect.

[pmacduff]

Thank you MoShawn...sometimes it just takes a "re" reading & I should have been more careful reading the SCP section.

I was in the right place (failure to implement...) just read it wrong.