EPCRS - Match on Missed Derferral Opportunity

[austin3515]

From EPCRS:

© If the employee should have been eligible for but did not receive an allocation of employer matching contributions under a non-safe harbor plan because he or she was not given the opportunity to make elective deferrals, the employer must make a corrective employer nonelective contribution on behalf of the affected employee. The corrective employer nonelective contribution is equal to the matching contribution the employee would have received had the employee made a deferral equal to the missed deferral determined under section .05(2)(b). The corrective employer nonelective contribution must be adjusted for Earnings to the date the corrective contribution is made on behalf of the affected employee.

The question is, this is not a QNEC (they would have said QNEC if it was required). But it says "Employer nonelective contribution." That seems problematic because perhaps the plan does not even have a profit sharing provision. Perhaps there is a profit sharing provision, but the vesting schedule is 2/20 on that source, while the match is 100% vested.

Have these questions ever been addressed?

[jpod]

I don't know if it has been addressed or not, and I hear what you are saying about the use of the phrase "nonelective contribution," but I've always assumed that it is treated as a match for vesting purposes under the terms of the plan. This is just based on the basic premise that the correction is designed to put the participant in the position he would be in had the error not occurred.

[Kevin C]

Does this help?

From Rev. Proc. 2013-12, Section 2.04:

Revising Appendix A, section .05, and related examples in Appendix B to provide that, in some cases, a matching contribution owed to a participant may be made in the form of a corrective employer matching contribution, instead of a QNEC, so that the corrective employer matching contribution would be subject to the vesting schedule under the plan that applies to employer matching contributions

I'm not seeing the changes this refers to, but then, reading 2013-12 when I don't have to tends to make my eyes glaze over.

[austin3515]

It does I guess except that it doesn't reference a match in Appendix B. Anyway, I am continuing my policy of depositing as whatever match it was supposed to be.

[401 Chaos]

Just curious if you anyone had further thoughts / experience on this issue.  There seem to be a lot of conflicting terms for the corrective match amounts made but the guidance seems clear that the IRS characterizes these as nonelective contributions.  Guidance also seems clear that these amounts do not require re-calculation of ACP testing for year at issue.

Question, if you generally treat these as a match, I assume that the corrective amounts get factored in for purposes of tracking maximum match for the year of correction?  If so but the plan has a nonelective contribution category and the corrective match gets placed in the nonelective contribution category, how do you go about ensuring payroll, etc. accurately tracks maximum match for the year?

[401 Chaos]

Just wanted to bump this up in hopes someone may have a thought on what I assume is a fairly common correction issue.  Main question really is whether the corrective "nonelective contributions" count toward match for a given year.  It seems to me they should but the characterization as "nonelective contributions" seems to throw things administratively.  Thanks.

[Tom Poje]

well,  Appendix B Section 2 .01...D indicates

This matching contribution is reduced to the extent that (i) the sum of this contribution and other matching contributions actually made on behalf of the employee for the plan year would exceed (ii) the maximum matching contribution permitted if the employee had made the maximum matchable contributions permitted under the plan for the plan year

 

so yes, it counts towards maximum match

how you insure any payroll system would know (if this is corrected during the current year and not after the fact) would be no different than a person deferring into 2 unrelated plans. unless someone tells them, how would the plans know when the person exceeds the deferral limit for the year.

[401 Chaos]

Thanks, Tom.  I thought the Appendix B terms made the answer pretty clear but have been struggling to convince a colleague differently given the nonelective contribution language.