SECURE 1.0 - Retroactive Safe Harbor 4% to Correct ADP

[Towanda]

A client sent us their census information this past week, and naturally their ADP Test failed miserably for 2022.  

I am preparing a communication explaining the owners' the option of amending the plan retroctively to provide for a 4% Safe Harbor Nonelective for 2022, or take a sizable refund of their deferrals.

Question:  We're well past March 15.  Assuming the client will elect to contribute a $12,000 Safe Harbor contribution to make this go away, is there still a requirement that they also pay the 10% excise tax on the excess deferrals, or is the concept of an "excess" gone by providing the 4% Safe Harbor?

[John Feldt ERPA CPC QPA]

If they amend to retroactively adopt the 4% safe harbor nonelective, then there is no ADP test, and therefore no refund and thus no late refund penalty.