Missed Deferrals - Correction Method

[Vlad401k]

One of our clients made a mistake with an elective deferral for one of their participants. This participant wanted to put in a rather large (a few thousand dollar) contribution at the end of the year, but somehow the request was not processed due to payroll company error. It's now past the end of the year and the participant missed out on maxing out their elective deferrals for 2015. They also did not receive the match that was attributable to that contribution. What should be the correct correction method?

I realize that there was recently a revenue procedure from the IRS stating that if the error is corrected within the first 3 months, the QNEC is not required to replace the missed deferrals. However, the match that would have been attributable to the deferrals is still required, correct?

Thank you.

[Tom Poje]

one such write up is found here

https://www.orrick.com/Events-and-Publications/Pages/New-401-k-Correction-Procedures.aspx

of course, it wasn't really written to handle your particular case in which it was a one time 'extra large' deferral. still, the concept of the employee benefiting by getting the deferral put in by a QNEC and still keeping the comp is the type of windfall this was intended to stop.

and yes, this says the match is still required

[Comp Ben HRIS]

Our benefits counsel told us that we could only avoid the QNEC if the participant was a new enrollee and we never started the contributions; if it was an existing enrollee where we simply did not increase the contribution, we must do a QNEC for 25% of missed deferrals plus 100% of missed match.

Is that incorrect?