Missed Deferrals 25% QNEC? or 50% QNEC?

[JustnERPA]

A catch-up eligible NHCE elected to defer the maximum in calendar year 2018. The calendar year plan allows catch-up deferrals. The employer stopped withholding once they reached $18,500. The employer started withholding deferrals again January 1, 2019.

To fix a missed deferral using a 25% QNEC instead of a 50% QNEC, a notice must be provided no later than 45 days after the correct deferrals begin. The error only affected catch-up deferrals.

The notice requirement states "Notice of the failure that satisfies the content requirements of section .05(9)(c) of this Appendix A is given to an affected participant not later than 45 days after the date on which correct deferrals begin;"

Could the term "correct deferrals" mean the next time a catch-up deferral applies to the participant? That would be the date on which such “correct deferrals” begin? If so, that would allow a 25% QNEC to fix the error.

Otherwise, the 45-day notice requirement can't be met and the 50% QNEC applies.

[Mike Preston]

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