ADP test failure

[thepensionmaven]

We recently took over a large safe harbor 401K in which the employer amended the plan prior to us, to eliminate an hours requirement for entry, effective 1/1/2014.

On May 1st of this year, the client tells me they had sent a "maybe" notice to the participants in November 2014 for 2015 but no-one seems to have a copy.

August 1st we received the W-2s for 2015 as well as census data.

Of course ADP failed.

Question, and I haven't done this in a while. This is why we do Safe Harbor.

The plan allows for Roth contributions.

Can the HCE employee contribution overage be recharacterized as employer contribution to the accounts of the NHCEs to the extent ADP is passed; and if ADP is still not passed, an additional QNEC would be required???

[Lou S.]

2015 calendar year test? Why not just do refund now? You have until 12/31/2016. Or if you are doing a QNEC you also have until 12/31/2016 to fund a QNEC for testing.

You just need to File a 5330 for the excise tax due since the refunds weren't done by 3/15/16 if you do refunds.

The um "lost" maybe notice is a separate and likely more troubling issue in my humble opinion.

I'm not sure what the relevance of the Plan having Roth contributions is to the original question.

[thepensionmaven]

If they go the QNEC route, will that save them on the 10% excise tax?

[BG5150]

Yes.

[thepensionmaven]

Cite?

[ETA Consulting LLC]

Don't need a cite. The 10% penalty applies to corrective distributions. If you fund a QNEC, then there wouldn't be any corrective distributions.

Good Luck!