Missed Deferral - One Payroll

[sdix401k]

A glitch caused one participant's deferral to be missed for one payroll cycle.  The issue was caught within 30 days.  Under the new rules client issues notice to employee with no corrective contribution.  The plan does not offer match so no missed match.

The question is in regards to missed earnings - do we have to determine or track if the employee decides to make a catchup contribution for the missed deferral?  Then provide missed earnings. The amount is very small, but the issue in my mind is how would you determine if that the change of salary deferral is a catch up or just a move to save more??

How are other handling this?

[duckthing]

"Catchup" isn't the word I would use here. But no, lost earnings would not be due on any prospective future election, even if the intent of that election is to make up for the missed payroll. In my mind that would amount to treating it as a retroactive deferral election, which isn't permitted.

[Belgarath]

Agree - Revenue Procedure 2016-51, Appendix A, .05(9)(a) is very specific on the correction for the situation as you describe it, and earnings would only be due on missed matching amounts, which doesn't apply in your situation.

[sdix401k]

Thanks!