Question regarding excise tax and correction QNEC

Certainly an operational defect (OD) and it has been corrected. Not all ODs give rise to a prohibited transaction (PT). To the extent you have deferrals deposited late you have a PT - but your correction was an ER contribution, there were no salary deferrals withheld for which the employer had prohibited use that would create a PT, in my opinion, so I think you are OK on that front.

This is a weird one, indeed.  It's not that the plan sponsor "knew" it was holding onto assets that should have been in the plan - they didn't know they'd computed the amount incorrectly.  They did "timely" contribute the revised amount's differences, right?  That "feels" like they wouldn't have done anything else wrong from a prohibited-transaction standpoint.

Certainly we'd talk about it more otherwise here on the boards, no, if anyone else had considered this angle?

Operational error only, assuming all amounts actually withheld from paychecks were deposited timely. So no prohibited transaction, as Kenneth stated above.

The correction should include missed earnings, of course, but there is no employer use of withheld amounts to create a PT, assuming there isn’t some other fiduciary breach here.

Thanks very much for the responses.  Employer did deposit corrective QNEC and missed earnings timely.