Missed Employer Contribution Allocation

Have a December 31, 2021 cross-tested 10 participant 401(k) plan where they fund a 3% employer safe harbor contribution. The plan sponsor is an S-corporation that went on extension for 2021. In addition, they funded a profit sharing contribution of 2% of salary and there are no conditions on the contribution allocation. The employer funded the safe harbor and profit sharing contribution to all participants except one of the nonhighly compensated participants who terminated employment during 2021.

It is now past September 15 when the mistake was discovered.

I believe they have until December 31, 2022 to fund the 3% employer safe harbor.

Could they correct this with an 11g amendment or must they correct through voluntary compliance? Could they correct with self correction?

We know both the SH and PS allocation for this one participant will be deductible for the 2022 year rather than the 2021 year.

Thanks.

What is the correction they're looking to make? Do they want to not have to make an allocation to the former employee? The 3% safe harbor is probably required no matter what, but they might be able to get away without the 2% profit sharing if the allocation formula in the plan document says that each participant is in their own group, and if all the testing passes without it.

If they do want to still give the former employee the 2% profit sharing for 2021, then go ahead and do it now. The last date to make a contribution that can be counted as an annual addition for 2021 is 30 days after the employer's tax filing deadline for 2021, including extensions. As you noted it would be deductible for 2022.

I could be wrong but I'm guessing the 2% PS is to make gateway because of the required 3% non-elective. In which case just make the contribution, credit earnings from when the original deposit was made to when this one is made, and deduct the contribution in the current year.