QNEC

[thepensionmaven]

We administer a SHM 401K. Auto enrollment, default deferral 4% in order to get the 4% SHM.

it has come to light that a couple of the eligible employees were not given the opportunity to enroll in 2016.

Accountant seems to believe these people are due a QNEC; how is a QNEC determined in such a case?  Would the employer in this case be obligated to make the 4% contribution as well as a 4% match?

 

 

[ETA Consulting LLC]

Just shooting from the hip, I think it would be 1/2 the deferral and the full match.  So, instead of 8%, you may be looking at 6%.   In your case, I 'think' the election that was missed would be 4%; as that was the deemed election in the absence of the employee's affirmative election of another rate. 

Good Luck!

[Belgarath]

See Revenue Procedure 2016-51, Appendix A, .05(8) through (10). If you meet the requirements, the QNEC is 25% of the missed deferral, plus the entire 4% match. So 5% (plus earnings, of course).