Participant not notified of eligibility - Correction

[Vlad401k]

If the Plan Sponsor did not inform an employee of their eligibility (and did not provide any 401(k) documents to the participant), what would be the correction procedure? 

 

The plan is a 4% Safe Harbor Match plan. Only HCEs deferred, so we don't know the NHCE ADP.

 

Thanks!

[Lou S.]

Do they not tell any NHCEs or just this one? and if just this one he must be the only NHCE. I'm not sure how forgiving the IRS would be with corrections of plans where no NHCE is benefiting.

I'm honestly not sure what the correction is in this case should be. But I would think a 2% QNEC (50% of what the deferral would have been to get full match) for missed deferral opportunity plus 4% QNEC for missed match and get either an affirmative election or opt out signed fast to stop the bleeding.

 

[John Feldt ERPA CPC QPA]

Isn’t this addressed in Rev Proc 2021-30?

[Vlad401k]

I've looked into https://www.irs.gov/retirement-plans/fixing-common-plan-mistakes-failure-to-provide-a-safe-harbor-401k-plan-notice

 

Based on that link, Lou is correct.

 

Give the recent changes with the missed deferral QNEC (0% for less than 3 months, 25% for between 3 months and 2 years), I wanted to check if the 50% QNEC for the missed deferrals would still apply to this situation.

 

Since that link did not provide any guidance on this question, it sounds like 2% QNEC for the missed deferrals + 4% for the missed Safe Match (both adjusted for earnings) would have to be funded.

 

Does that sound right?

 

Thanks!

[Artie M]

Right.  This is the correction under the facts of Ex. 9 of Section 2.02(1)(b) of Appendix B of Rev. Proc. 2021-30, which are the same as these facts.