Discretionary non-elective already paid in and fails testing

[Jim Chad]

401(k) Platform, so individual accounts. Doc has each person in own group. And all correspondence said "yes, you can pick and choose as long as no HCE receives anything".

But here is what they have done. They decided bonuses based on profitability of that department. 2 of 5 HCE's received a contribution and 31 of 70 NHCE's received a contribution.

This was paid in February and the controller did not deduct it in 2014. He plans to deduct it this year. This is going to fail testing using full years comp and one of these 2 HCE's has left. So we will fail by quite a bit. Is the correction simply to withdraw enough from the HCE's to pass 401(a) testing? Any penalties?

[Lou S.]

I think the correction is simply to make a very expensive contribution for the NHCEs to pass testing. Good luck.

[Bird]

If nothing has been done to memorialize the allocations, then I don't think they have to be considered final. That is, you could say "oops" and take some money from the HCEs and allocate it to others. You could in a pooled environment, and I don't see self-direction making the deposits irrevocable allocations.