Payroll vendor missed a deferral/match. Employer "fixed" it by doubling up on future payroll

[kwalified]

A S.H. 401(k) had a couple of participants whose deferrals/match were "turned off" by the plan sponsor for one payroll. The sponsor discovered this and apparently authorized the payroll company to double up on the subsequent payroll to make the participant "whole".

It is my understanding that the sponsor should have self corrected (the amounts were miniscule compared to the plan assets) by depositing 50% of the missed deferral and match into the participants account.

Now that the problem has been exaggerated by the employer doubling up on a future payroll and in essence allowed the participant to change their deferral rate outside the plan parameters what would be a recommended course of action?

Here is an example, $2000 payroll participant was deferring 5% and getting a 4% SH basic. To make up for the missed deferral/match, sponsor upped them to 10% and a 8% SH. Even if you allowed the participant to double up on the deferral, the SH basic would still remain at 4%.

[Lou S.]

Maybe I'm crazy but I think you are missing the forest for the trees.

A small error was found on one payroll and fixed on the next, I don't really see a problem.

[kwalified]

It is a small error.

[Kevin C]

As for the missed deferral, it would likely fit within the brief period exclusion rule in Appendix B, Section 2.02 of Rev. Proc. 2012-13. Your description sounds like they may have missed out on some match because of the payroll error. If that is the case, they should receive the match they would have received if their deferral elections had been followed properly.

With the EPRCS correction methods consisting of corrective deposits by the employer, I'm not convinced the IRS would consider doubling up on deferrals the next pay period as being an appropriate correction. Anyone have that come up in an audit and have the IRS approve of it?