Missed deferrals with match correction

[BG5150]

Company missed a deferral opportunity for one employee.  Failure to implement an employee election.  No doubt here.

Correction is 50% QNEC.  I get that.

But to make up the match, it's:

Quote

"(c) Missed opportunity affecting matching contributions. In the event of failure...if the employee would have been entitled to an additional matching contribution had either the missed deferral or after-tax employee contribution been made, then the Plan Sponsor must make a corrective employer nonelective contribution for the matching contribution on behalf of the affected employee, or a corrective QNEC in the case of a August 2, 2021 230 Bulletin No. 2021–31 safe harbor plan under § 401(k)(12)."

What does "nonelective contribution for the matching contribution" mean?  Is it a convoluted way of saying it has to just be a match?  If not, what kind of nonelective contribution?

This is NOT a safe harbor plan, so it won't be a QNEC.

[C. B. Zeller]

I think they can't technically call it a match, because there weren't actually any deferrals. So calculate what the match would have been, and make that as a nonelective contribution.

[Belgarath]

How 'bout vesting on this? Say the employer matching contributions (not a safe harbor plan) have 6 year vesting. Say the participant subsequently terminates at 60% vesting for matching contributions. Is the "nonelective" contribuition subject to the matching contribution vesting provisions? Or is it automatically 100% vested like a QNEC, even though it isn't a QNEC? The "nonelective" contribution would just be deposited to the match account?

I'd apply the vesting schedule, but maybe I'm all wet.

[RatherBeGolfing]

58 minutes ago, Belgarath said:

How 'bout vesting on this? Say the employer matching contributions (not a safe harbor plan) have 6 year vesting. Say the participant subsequently terminates at 60% vesting for matching contributions. Is the "nonelective" contribuition subject to the matching contribution vesting provisions? Or is it automatically 100% vested like a QNEC, even though it isn't a QNEC? The "nonelective" contribution would just be deposited to the match account?

I'd apply the vesting schedule, but maybe I'm all wet.

I'm trying to confirm the same thing, and I don't see a problem with applying the vesting schedule.  If the nonelective was meant to be 100% vested, there would be no need to distinguish between nonelective and QNEC in the Rev Proc.

Anyone disagree?

[Belgarath]

20 minutes ago, RatherBeGolfing said:

If the nonelective was meant to be 100% vested, there would be no need to distinguish between nonelective and QNEC in the Rev Proc.

Thanks. That's precisely where I'm coming from. Plus, FWIW, I seem to recall, at some time way in the past in one of EPCRS iterations, that there was a specific reference to a change in the provisions where it wouldn't be a QNEC and vesting provisions could apply, but I think it was way back in RP 2013-12 or something like that. I'm too lazy to look back over all the changes - but to me, it seems supremely logical that a non-safe harbor match correction like this should be able to apply the vesting schedule.

So no, no disagreement from me! (That must mean I'm not a disagreeable person, in spite of what my wife might say...)

Maybe I'll take a look back at it after all to see if my memory is completely off base. I'll post if I find anything.

Hah - look what I just found - from RP 2013-12

 

 Revising Appendix A, section .05, and related examples in Appendix B to provide that, in some cases, a matching contribution owed to a participant may be made in the form of a corrective employer matching contribution, instead of a QNEC, so that the corrective employer matching contribution would be subject to the vesting schedule under the plan that applies to employer matching contributions

 

 

[ErisaGooroo]

It means that the missed match is funded as a non-elective contribution and may be subject to vesting or may be contributed as a Q-NEC.  The "missed match" shouldn't be sourced as a match, it should be sourced as a non-elective contribution. This is the reason the ACP test doesn't need to be redone after a missed match is corrected.  

[QNick]

In a case where this applies to an HCE, since the Missed Match Contribution is not subject to ACP testing, it would need to be tested for non-discrimination under section 401(a)?