Any experience on how "hard line" is this requirement?

[Belgarath]

So, suppose you have a safe harbor (match) plan where some newly eligible (eligible 9/1/2022) participants were inadvertently excluded for the last 3 months of 2022, but were then properly allowed to defer beginning 1/1/2023.

Under 2021-30, Appendix B, .05(9), you have the reduced QNEC requirement if you satisfy certain conditions. One of those, in .05(9)(b)(ii) is that the Notice be given "not later than 45 days after the date on which correct deferrals begin" ...

Well, we're past that date - they started deferring 1/1/2023. But it doesn't seem reasonable that you would be precluded from using the lower QNEC, particularly since the Safe Harbor correction method is otherwise allowed until the end of the SCP correction period.

Now that SECURE has potentially loosened the EPCRS, it seems reasonable to use the reduced QNEC in this situation, other than for terminated participants (and even that piece is debatable, but I'd play it safe).

Any thoughts?

[RatherBeGolfing]

15 minutes ago, Belgarath said:

But it doesn't seem reasonable that you would be precluded from using the lower QNEC, particularly since the Safe Harbor correction method is otherwise allowed until the end of the SCP correction period.

I'm a bit split on this one, but I tend to disagree.   Opportunity is a key part of this correction.  If you have a missed deferral but the employee still maximized their contributions, you don't have to correct.  Why?  Because the participant took full advantage of the opportunity to contribute, even with the failure.  The timely notice makes sure that the participant knows that a reduced QNEC will be provided, so if the participant wants to maximize contributions or reach a pre-established goal, they will need to increase contributions.  If we delay the notice, the participant has less time to make up for the missed opportunity, making it more difficult to reach the intended amount.

I know we often find out when its too late to provide notice, but should the participant pay for that?

Just my two cents.  Like I said, I'm split on the issue but this how I try to make sense of it.

[Paul I]

The problem with trying to use 25% is the failure to provide a timely notice.  To use the 25%, the notice must be provided within 45 days of the start of the correct deferrals, which in this case admittedly did not happen.  The notice deadline is not related to when the MDO occurred during the plan year

[KEC79]

I agree with Paul. 50% would be the safe option here. I don't believe SECURE 2.0 changes this since it expands the types of errors that can be corrected but doesn't reduce the size of corrective contributions.

[Belgarath]

Thanks all.