Retroactive amendment for (a)(26)

A cash balance plan excludes all HCEs except the owner.  The plan defines the contribution credit for Group 2 (all participants other than the owner) as .5% accrual to cover meaningful benefits.  All NHCEs are participating but the 40% coverage requirement of (a)(26) isn't satisfied for 2021.  The only way this can be cured is by making one HCE a participant retroactive to 2021.  Can this be done by an 11(g) amendment naming one HCE a participant, or will that be deemed discriminatory since effectively the amendment is granting an accrual just to one HCE?  Must this go through VCP? 

Thanks.

Strictly speaking, a retroactive amendment to cure a 401(a)(26) failure is a 1.401(a)(26)-7(c) amendment - however most of the same rules apply as under 1.401(a)(4)-11(g).

So no - you can't do a -7(c) amendment to increase only an HCE, because the amendment has to be nondiscriminatory on its own, under the -11(g) rules.

If there are no NHCEs that could be added to the plan (including possibly someone who has not yet satisfied age and service requirements), then your options are:

1. VCP (if they even approve it)

2. Retro amendment that increases the one HCE, plus enough NHCEs to satisfy coverage and nondiscrimination on its own

All of this is assuming of course that the plan says a 401(a)(26) failure will be corrected by amendment. If the plan document has a fail-safe in place, then you have to apply the fail-safe.