Correction on Missed Deferrals

Hello, 

We have been working to make corrections on missed deferrals from 2018 through 2022; this includes on the employee and employer side. Is there a general rule or guideline to make these corrections? We've been receiving information in pieces and it seems that every time we have it complete, something else comes up and we need to start over. 

We were instructed to look at each paycheck and determine the missed deferrals but it seems there's so many other contingencies, that we feel it would be easier to calculate on an overall basis. 

Has anyone had experience with this situation or can provide any better help?

Thanks!

Are you asking how to determine the amount of each missed deferral or how to correct missed deferrals? When you say this includes on the employer side, do you mean employer contributions (not deferrals)?

If you're trying to determine missed deferrals, you need to start by determining the amount of deferrals that should have come out of each paycheck for each individual participant, the date the deferrals should have come out, and the date the deferrals did come out. You can't calculate on an overall basis. (I'm not sure what you mean by that.) Also, what other contingencies are you referring to?

Are you the employer or a recordkeeper? Lots of unanswered questions here so it's hard to give you guidance.

For how to correct, check EPCRS (Rev. Proc. 2021-30). It gives specific correction methods for the situations here.

Thank you. We are the employer making the corrections to the employee contribution and the employer contribution. We've been in talks with our lawyers and consultants but it seems like we need to look at pay check by pay check and make a correction, vs. an overall correction on the total wages. 

I was looking for guidance more so on the pay check by pay check vs. an overall correction on the gross wages. 

Thanks!

Jumping into EPCRS for missed deferrals for the first time can be like jumping into the deep end of the swimming pool when you don't know how to swim.  There are a lot of rules that cover many differing fact patterns.  It sounds as if you have a situation where there is one issue that started in 2018 that has continued through 2022 (and maybe even into 2023).  Don't get too distracted by the EPCRS steps using brief exclusion rules, or exceptions for auto-enrollment unless applicable, or for difference between actives and terminated employees, all of which have some tantalizing, lower-cost cures associated with them. 

You will need to calculate the missed deferrals by payroll.  If there is an associated match, check the plan document to confirm the match frequency and whether there are any match true-ups.  This will determine how to calculate the match associated with any missed deferrals.

Once you have all of the missed deferrals and associated match amounts, you will need to calculate lost earnings associates due on these amounts.  There are some choices available under EPCRS that do not require applying investment elections to each amount.  This can be a time-saver.

Remember to look at compliance tests for each year to see if the correction will impact the results.

Make sure everyone involved in on board with the plan for correction.  The calculations can be labor intensive and you will not want to redo should someone (like the CEO, CFO, Plan Administrator...) challenge the result.

May your lawyers and consultants [figuratively] be experienced lifeguards!