Missed Deferral Opportunity

[TMcfall]

A client recently acquired a number of employees but never gave the employees the opportunity to enroll and begin deferrals. The client is looking for a solution to remedy this with the employees as well as keeping the plan compliant. I know that a QNEC is owed for the missed opportunity and the employer is responsible for 25% of employee deferrals and 100% of the Safe Harbor Match.

My question is since the employees were never notified or given the opportunity to elect a deferral percentage. What would you take 25% of?  

[Bri]

Doesn't EPCRS say to assume the highest deferral rate that gets matched at 100%  (so 3% under a SH basic match, or possibly 4% if enhanced.)

(Haven't dove in deep to the new version.)

[BG5150]

53 minutes ago, Bri said:

Doesn't EPCRS say to assume the highest deferral rate that gets matched at 100%  (so 3% under a SH basic match, or possibly 4% if enhanced.)

(d)(i) If the employee was not provided the opportunity to elect and make elective deferrals (other than designated Roth contributions) to a safe harbor § 401(k) plan that uses a rate of matching contributions to satisfy the safe harbor requirements of § 401(k)(12), then the missed deferral is deemed equal to the greater of 3 percent of compensation or the maximum deferral percentage for which the employer provides a matching contribution rate that is at least as favorable as 100 percent of the elective deferral made by the employee.

AND

The required QNEC on behalf of the excluded employee is equal to (i) 50 percent of the missed deferral, plus (ii) either (A) an amount equal to the contribution that would have been required as a matching contribution based on the missed deferral in the case of a safe harbor § 401(k) plan that uses a rate of matching contributions to satisfy the safe harbor requirements of § 401(k)(12)...

[Kevin C]

How long were they improperly excluded?  Rev. Proc. 2021-30 Appendix A .05 (9) has safe harbor correction methods that apply if you follow the requirements listed for (a) exclusions not exceeding 3 months  and (b) exclusions not extending beyond the SCP correction period for significant failures (which was extended).

[Patricia Neal Jensen]

Of "Compensation" as defined by the Plan Document.