QACA Missed Deferral Issue

[52626]

Compensation includes bonuses.

Participant A made an affirmative elective to defer

Participant B was auto enrolled.

There were bonus payments issued in 2024 and deferrals were not withheld.

How to correct -

Does the 9 month rule apply so no QNEC is required?

The 9 month rule would apply if the  initial elections were not timely processed.( assuming deferral elections must be properly implemented consistently from April 1st - December 31st

The question is does the 9 month rule apply regarding missed deferrals subsequent to enrollment. Deferrals properly calculated. When the  bonus was paid no deferral was calculated, 

We have differing opinions

One opinion is the 9 month rule applies even though these are deferrals after the initial elections were  processed

The other opinion is the 9 month rules does not apply since these are missed deferrals subsequent to enrollment and are subject to a QNEC

[JRN]

Because the plan has automatic contribution features, I think the special safe harbor correction method would apply. The term "Employee Elective Deferral Failure" is defined simply as "a failure to implement elective deferrals correctly". I don't see that a different rule applies if the failure occurs after the initial enrollment.