Allowed to defer early--correction?

[BG5150]

We have a plan that has a 21/1, quarterly entry policy.  However, they started letting a bunch of people defer early.

I know one correction is to amend the plan retroactively to allow them in.  We have four people involved and 1 will become an HCE in '17.  So, it's a 75%-25% HCE/NHCE ratio.  Is that ok?

My main question is:  do they have to let everyone in whom the ALLOWED to defer?  Or just those who CHOSE to defer.  For example, if we have 12 people hired in '16 who were given the chance to defer, but only the aforementioned 4 people chose to do so, whom do we have to structure the amendment around?

[Trisports]

My understanding is that the retroactive amendment is available only for NHCE. Also, the retroactive amendment must be submitted through VCP for approval.

We've always recommended to return the ineligible contributions to participants.

 

[BG5150]

I didn't think you had to submit those any more, as the correction in Appendix B is for SCP. 

Also, the amendment is of if "teh employees affected by the amendment are predominantly nonhighly compensated employees." (emphasis mine)

[Kevin C]

Rev. Proc. 2016-51, Section 6.02 says you have to make a full correction with respect to all participants.  In 6.02 (3), there is a consistency requirement.  I don't think amending to only allow those let in early who elected to defer is going to satisfy those requirements.

You are correct that it is one of the few things you are allowed to correct under SCP using a plan amendment See Section 4.05(2). It also mentions that the amendment is to conform the document to the plan's prior operation.  If some ineligibles were given the opportunity to defer, even if they chose not to, that is part of how the plan was operated.  

[BG5150]

Thanks, all.