Additional Correction to an ADP Test

[justatester]

12/31/15 PYE: Test was run and corrected by 3/15

We discovered an error which resulted in rerunning the test. Unfortunately, the test failed an additional $462 in ROEs is necessary. It is approximately, $51 per HCE.

Is there a de minimis amount that would permit the plan not to make an additional correction?

[Tom Poje]

well EPCRS speaks of corrective distribution in amounts less than $75, and the regs use the term 'corrective distribution' to refer to failed ADP test (1.401(k)-2(b)(iv)(E)(v) is one example.

so 'arguably' you wouldn't have to (but only if the costs of processing things make it nonsensical)

6.02(5)(b)
Delivery of small benefits. If the total corrective distribution due a participant or beneficiary is $75 or less, the Plan Sponsor is not required to make the corrective distribution if the reasonable direct costs of processing and delivering the distribution to the participant or beneficiary would exceed the amount of the distribution. This section 6.02(5)(b) does not apply to corrective contributions. Corrective contributions are required to be made with respect to a participant with an account under the plan.

I think, for example, if the asset house charged $50 for any distribution, then in your case the HCE would only get $1

perhaps the other issue which I have never seen addressed, lets suppose you make the refunds because there are no distribution charges. does the 10% excess penalty for late refund apply?

let's turn the question around. I run the test late, calculate refunds, pay 10% penalty.

I later learn I had bad data, and the refund was overstated. so now what, I never heard of someone requesting a refund of the 10% penalty.

But in that area I simply don't know, since every attempt was made to run the test correctly on a timely basis.

will testing using comp - deferral change anything?