Missed Match - Included in Testing?

A participant had a Missed Deferral Opportunity in 2025. There were missed match contributions associated with the Missed Deferral Opportunity.

Should the Missed Match be included in Compliance Testing?

Thanks.

Bazaarly the answer is no. From the ERISApedia Plan Corrections textbook (highly recommend!)

The plan must perform ADP/ACP testing before correcting errors resulting from failure to implement or improper exclusion. If the plan fails either the ADP or the ACP test, it must first correct those tests before correcting Elective Deferral Failures. EPCRS adds:

In order to determine whether the plan passed the ADP or ACP test, the plan may rely on a test performed with respect to those eligible employees who were provided with the opportunity to make elective deferrals or after-tax employee contributions and receive an allocation of employer matching contributions, in accordance with the terms of the plan, and may disregard the employees who were improperly excluded. [EPCRS App. A §.05(2)(g)]

That doesn't sound so weird - but what if the exclusion was only part of the year?  Would you use full year amounts or only those where the guy wasn't in an overlooked status?

As a parallel to the original scenario, people who aren't eligible for a 401(k) plan at all because of their division or job category wouldn't show up as zeros in the ADP test.  This is sort of inadvertently similar.

8 minutes ago, Bri said:

That doesn't sound so weird

Well it really only makes a difference when it is an HCE because one person is a larger share of the total.  I literally had a scenario where the only HCE had a signficant missed deferral and I was able to exclude him from the ACP test (it was a 403b plan). That felt weird to me!

To your second question, that was the next paragraph (Again this book is really pretty neat)

EPCRS does not directly address ADP calculations when an employee was improperly excluded for only part of the year. However, the whole-year correction methods in Appendix A apply to partial year corrections in Appendix B. [EPCRS App. B §2.02] Accordingly:

• The plan must correct ADP failures before dealing with improper exclusion, and

• The plan has the option to disregard participants with partial exclusion exclusions altogether from the ADP test. (Note that the same choice must be made for all participants subject to the improper exclusion. [¶6.2.2])

If the plan elects to count participants with partial year exclusions, logically it would count the deferrals the participant actually made and disregard corrective QNECs (which are determined after running the ADP test).

Example 9.8.2 Dan should have entered his employer’s calendar year safe harbor 401(k) plan on January 1. However, he was improperly excluded until July 1, at which point he elected to defer 6% of his compensation. Dan’s total compensation for the year was $100,000. His actual deferrals for the balance of the year were $3,000. His ADR for the year was 3% ($3,000 / $100,000). The employer can choose to count Dan or exclude Dan in performing the ADP test. Assume the test passes and the NHCE ADP was 4%. Dan’s missed deferrals are $2,000, Dan’s compensation for half the year ($50,000) multiplied by 4%. The corrective QNEC is 25% of $2,000, or $500, using the two-year safe harbor. [¶9.6.5]