Excluded Class Allowed to Defer

Newbie here. I have a plan that excludes a class of employees in the plan document, but one of the employees of this class was allowed to defer during the plan year. What is the best  corrective action - distribute the deferrals? Or is there anything else that can be done? Can't fix payroll since this is from last calendar year. 

There were also a few employees that did not meet any of the eligibility requirements that were allowed to defer. Can we do a retroactive amendment to let them in? If that is ok, would that be an issue with the employee above who is considered excluded? 

Check the current EPCRS procedures. I believe on the ineligible class you need to refund the deferrals with earnings and transfer any related match an earnings to a suspense account to offset future employer contributions.

On the early entry of otherwise eligible employees that can be corrected by amendment to bring them in early (if it meets the requirements in EPCRS) or by correcting like above for ineligible class.

I can't recall if this qualifies for Self Correction or VCP, if it is just the early entry and you bring them in by amendment as that is "almost" always available for Self correction with t hat method but the not sure if the excluded class requires VCP.

Can't the excluded class say something like "those employees in _____________ are excluded except for John Doe"... and do this in an amendment like the early entry employees?

Are either of the affected employees HCEs? If so, you do not have the option to let them in early. You would have to refund the contributions with earnings.

If you allow the employee in who didn't meet the plan's age and service requirements, it will affect your coverage test. Make sure that will not be a problem if you decide to go that route.

17 hours ago, C. B. Zeller said:

Are either of the affected employees HCEs? If so, you do not have the option to let them in early. You would have to refund the contributions with earnings.

If you allow the employee in who didn't meet the plan's age and service requirements, it will affect your coverage test. Make sure that will not be a problem if you decide to go that route.

No. None are HCEs.

15 minutes ago, kimso said:

No. None are HCEs.

Ok, then you have the option to allow them to participate early by retroactive amendment. Be mindful of the impact on your coverage test.