Exclusion of Eligible Employees from 401(k) Deferral Opportunity

[ERISA1]

We're looking at a potential takeover in which HCEs have been allowed to defer but none of the eligible NHCEs were offered the opportunity to defer. As a result, the NHCE's ADP is 0%

Appendix A Section .05(2) of Rev Proc 2013-12 calls for a contribution equal to the "missed deferral opportunity"; defined as 50% of the actual deferral percentage.

The employer can argue that the ADP is 0%, and therefore 50% of 0% is 0. However, in this case, the employer created the 0% ADP. It seems he should not be allowed to benefit from the wholesale exclusion

What is a reliable correction under these facts? Should we assume there is a minimum 3% ADP?

Your feedback is much appreciated.

[QDROphile]

If you do not expect to correct via VCP, you should consider if SCP is unavailable because of egregious error. You might look at the HCE ADP and figure out what the NHCE ADP would have to be to support the HCE ADP, or 3% if 3% is higher.

[BG5150]

How long was this going on?