QNEC to a HCE over and above his Salary Deferral Limit of $10,500

[Guest UKH]

An employer missed out a HCE to be able to enter the Plan on July 1. The employer did catch their mistake in September. The employer realizes that they will have to make a QNEC in the amount of the average deferral percentage. However the question arises whether the HCE can still max out his full $10,500 as well as receive his QNEC on top of it. I feel that the total can not be more than $10,500 (including the QNEC) since he is a HCE. If it was a NHCE then QNEC+$10,500 would have been feasible. Is that correct?

Thank you & Happy Holidays to all the members!

[Alf]

If the error was caught in the same plan year and the employee will not be harmed by the exclusion (the employee can maximize the annual contribution over the remaining period in the plan year), then I think the latest APRSC guidance says that you don't have to QNEC. A QNEC equal to the average deferral percentage for the HCE group will be a windfall to him if he gets to make deferrals for the same plan year.