Make-up under Rev, Proc. 2015-28

[Belgarath]

So, deferral election is signed, isn't implemented properly, and 3 payrolls are missed.

No QNEC, but missed match plus interest must be contributed. Here's my question.

Say the participant signed a deferral form doing a flat dollar amount of, say, $50 per paycheck. Since it wasn't withheld for three paychecks, that's $150.00 her account is missing. So she does a special one-time deferral election to have $200.00 withheld from her next paycheck, then it reverts back to the $50.00 thereafter.

When it comes to calculating the make-up match, assuming the $200.00 amount doesn't cause it to hit any "cap" - am I correct in assuming that the only make-up will be interest on the match that should have been made each pay period? In other words, since she will receive her full match due to the special one-time deferral increase, there shouldn't be any additional match due, as she will already receive 100% of the match she would have received had the error not occurred. Or, is a make-up match required regardless of her special election? I lean toward the former, both from a common sense viewpoint, and the general overriding principle of self corrections which is to put the participant in the same position they would have been otherwise.

The amounts involved are negligible, but I'm thinking more in procedural terms if something like this occurs on a larger scale.

[ErisaGooroo]

I think the corrective match would be due on the three payrolls including lost earnings in addition to the $200 the participant deferred on the next payroll. I'm interested to hear what others think... good question.

[Belgarath]

Thanks. Anyone out there going to the ASPPA conference, and if so, is it too late to see if the IRS would address this from the podium?

In this case, the amounts are so trivial it doesn't really matter much, but on a large plan with a larger number of participants, the difference could be significant. Of course, with a large number of participants, some of them would NOT do the "make up" contribution so this question wouldn't even apply to those participants.

[ErisaGooroo]

Afterthought... if it was payroll determination for the match, I think there would be an additional match due. If it was plan year determination, I don't think there would be an additional match due.

[Belgarath]

Ok, why the difference? Let us assume, for the sake of simplicity, that the match is dollar for dollar up to 6% of pay. Let us further assume that the $150.00 extra deferral, plus the :normal" $50.00 for a total of $200.00 for one payroll only does not exceed 6% of pay.

If you do it end of year, she gets her full match.

If you do it payroll by payroll, she still gets the same match. Why should she be entitled to an additional $150.00 just because the match is calculated per payroll? You are doing self-correction of an error, so the fact that it is per payroll shouldn't preclude the same ultimate result as per year, I don't think...

As you can see, I'm struggling with a proper interpretation in this issue. The conservative method would seem to be to take the Rev. Proc. language extremely literally, and give the extra $150.00 no matter what. And that's probably what we'll recommend. But I would be very interested in any thoughts from anyone.

[chc93]

I think she gets the match on the "extra" $150 deferral. The fact that she deferred $200 on the 4th payroll doesn't "fix" the problem of the actual missed deferrals. The participant may be in the same place after her "fix", but the fact of the matter is that the plan still failed to follow the deferral election. Say another participant actually deferred $50 for the first 3 payrolls, $200 for the 4th payroll, and back to $50 thereafter. They both should get the same match. ??