missed deferral opportunity... for really small amounts

I've got a plan that was brought to me to fix.  The financial advisor (!!) accidentally wrote the plan with immediate eligibility... figuring that the statutory exclusion would 'override' that and keep out all of the employees who work 5-10 hours per week.  Sigh.  There are other problems, too, so I'm recommending that they terminate the plan and we start over (keeping in mind successor plan rules, of course).

As I'm calculating missed deferral opportunities, many of the affected participants are getting total corrections of ~$20.  They don't have accounts in the plan (of course), so when we get them set up they're going to request a distribution (many are also terminated), and they won't see that money, as it will all go to pay plan distribution fees.

I know that EPCRS 6.05 has language about not correcting small amounts, but I don't know if that is applicable here.  I was hoping to do something like split the total correction amongst the affected employees who are above the distribution fee limit... and tell the others that their correction is below the plan's distribution fee threshold so they don't get anything.

Is this OK?  Are there other possible remedies?  Thanks.

A workable approach (read somewhat practical, but not necessarily by the letter) is very much like the approach you are considering.  The only difference is to include anyone who is an active employee in the splitting of the correction.  You also could consider giving each active employee in the split the greater of their MDO or a per capita split of whatever is left over.

I believe the language in EPCRS requires the employer to make the deposit, but at time of payout you can either wipe it out with the distribution fee or forfeit it.  It still needs to be made as far as I have understood that.  I don't know how many total participants the plan has, but is making the required corrections, terminating and distributing by December 31 and waiting till the beginning of 2028 to start a new plan the best approach?  Will those participants actively contributing be receptive to losing deferrals for all of 2027?  Is the employer in a State that has a mandated state retirement plan they will need to join for 2027?  Just some things to consider.

Did the plan’s administrator deliver the summary plan description to participants who were immediately eligible?

Whether that was done, or omitted, might matter in the administrator’s and other fiduciaries’ evaluations of correction opportunities.

This is not advice to anyone.