MDO on comp exclusion spans multiple years - Do all get the 25% QNEC or are some ok at 0%

[401kology]

Client has been excluding bonuses and commissions since 2024 and we know we can correct by using the 25% QNEC with the notice requirement, but some employees were not impacted until 2026. Do the participants who only had MDOs in 2026 also get the 25% QNEC (similarly situated comes to mind) or can the 0% QNEC apply if they only had MDOs in 2026?

[Artie M]

As far as I know, there is no clear statement in 2021-30 (or related guidance) regarding this issue.  EPCRS guidance seems to measure the correction period from when the failure first occurred for the "affected eligible employee"   [singular]. 2021-30 AppA.05(9).  The guidance points to correction periods.  That seems to support distinguishing between employees.  But as you parenthetically note EPCRS generally requires corrections to be consistently applied.  However when you look at the consistency requirement it points to errors for a plan year "Generally, if more than one correction method is available to correct a type of failure for a plan year (or if there are alternative ways to apply a correction method), the correction method (or one of the alternative ways to apply the correction method) should be applied consistently in correcting all failures of that type for that plan year." S6.02(3).  I haven't done the historical research but I think this rule has been around since the program was established.  I am saying this because I don't think the corrections provided for periods of less than a plan year were in place back then (e.g., the 3-month safe harbor).  Also, treating employee groups differently arguably doesn't necessarily violate a "similarly situated" concept.  A participant who missed deferrals since 2024 is not similarly situated to a participant who missed deferrals since 2026.  The fact that EPCRS provides different corrections for these different groups in and of itself seems to support being able to correct their specific MDOs using the safe harbor that applies to that specific MDO.  Regrettably, these are just my thoughts.   

[401kology]

For the record, my thought is that the 25% QNEC would apply to all because the initial failure was in 2024.

[401kology]

Thanks @Artie M the regulations definitely do not address these types of issues. I have heard the conservative approach is 25% for all affected employees but I agree with you that someone who has been affected since 2024 is not the same as just 2026.