Correction of Election Mistake

[HCE]

We had a participant who meant to defer his compensation until 2022, but he accidentally entered 2099.  This was clearly a mistake, as he will be well over 150 years old in 2099.  I know there is no real way to accelerate payments once the schedule is set (outside those listed in the regs, which we've already ruled out or otherwise explored), but are there any exceptions where the election was clearly, on its face, a mistake?

[Peter Gulia]

What default provision (if any) does the written plan state for a participant who has an opportunity to elect but does not?

If there is such a provision, might the employer use plan-provided discretion about the plan’s administration to find that “2099” was no election?

These are only questions, and I don’t suggest any conclusion.  Get your lawyer’s advice.

[EBECatty]

I agree with Peter's suggestion to get their own lawyer's advice and possibly use the default provision, but I will say that I have advised that common-sense corrections are appropriate in similar situations, especially if there is some other evidence suggesting the true intent (e.g., this person had the same amount in scheduled in-service distributions for 2020, 2021, and 2023). 

I had a similar situation a few years ago involving an error in a decimal place that resulted in a participant's online election to defer $1,000,000 instead of $10,000.00. The person earned well under $1,000,000; they had a history of deferrals more in line with $10,000; and the mistake was immediately noticed on the year's first payroll. Personally, I'm comfortable advising to correct to the intended result in situations like that one. 

[CuseFan]

2 hours ago, EBECatty said:

I'm comfortable advising to correct to the intended result in situations like that one.

Yes, common sense should prevail. I mean how often do you resolve a questionable situation or an obvious mistake by applying common sense but still end up in trouble with the IRS or some other government entity? Oh wait, yeah, better refer them to their attorney.

[EPCRSGuru]

Attorney advice is appropriate here.  An attorney of my acquaintance has recommended what he calls the "impossibility standard."  We use it from time to time when people who have no children elect a dependent care FSA instead of a health care FSA, elect a pre-retirement survivor annuity when they are unmarried, etc.  I would think your example would definitely qualify as impossible!

[Bill Presson]

I thought this was a political post. 😇