Minimum deferral percentage - operational failure?

[mrslappywhite]

Hello!

Plan has a minimum deferral limit of 3% based on plan year compensation (just a plain-Jane 401(k) PSP, not a QACA or EACA).

I am currently reviewing the 2015 census (10/31 pye) and there are multiple participants deferring less than 3%. Some are close but are not hitting 3% because they did not have deferrals taken from a bonus (even though plan does not exclude bonus compensation). Others are deferring a set dollar amount every pay, and on a plan year basis these amounts are not adding up to 3% of comp.

And if I am interpreting the terms of the plan document correctly, the participants entering during the year, while they may be deferring 3% or more on a per-pay basis once they start, they are not technically at 3% because of the plan year compensation provision.

Does anyone have any experience with this issue and how to address? This would be an operational failure, correct (plan operations not conforming to plan document)? And so would need to be corrected?

Is retroactive amendment an option at this point? Either to eliminate/reduce the minimum deferral percentage and/or change to per-pay basis? (Although that still leaves the folks who are putting in a set $/pay.)

Any advice would be appreciated...I've scoured the boards here and researched elsewhere without a light to shine on this.

Thanks!

[shERPA]

Good reason not to have such a provision in the plan, what purpose does it serve other than a trap?

I think you can amend the plan by 12/31/15 to remove this requirement retroactive to 1/1/15. For prior years I don't know that there is anything that can reasonably be done about it. Could probably get the IRS to agree to a retroactive correction via plan amendment via EPCRS if the sponsor would want to submit it via that process.