Employer Corrective Contribution count towards $18,000 limit?

Employer did not use the plan definiution of compensation correctly and excluded bonus payments for 2 now former employees. Sef-correction is being performed after severance from employment. 

Would the 50% employer corrective contribution count towards the employee's $18,000 annual contribution limit for 2017?

Thank you!

Without researching it, I think a "corrective" contribution is a "QNEC" and not a deferral subject to 402(g)....

Not sure what you're asking, but keep in mind that there is no "missed opportunity" that would exceed 402(g).  So, if the employee (who is under 50) had deferred $17,900 and would've been scheduled to defer another $500 from the bonus, then the missed opportunity is only $100.  50% of that amount, of course, would be $50. 

Good Luck!

the corrective amount doesn't show on your W-2 as deferrals either

2 minutes ago, IhrtERISA said:

Thank you for the responses so far. 

Yes, the corrective contribution would be a QNEC. While this QNEC  itself (being 50% of the missed opportunity) wouldn't put the participant over the $18,000 threshold, the issue is whether it would count towards his annual limit and thus limit his deferrals for the remainder of the year? 

It's a QNEC, not a deferral, hence it doesn't "consume" any part of hte $18k limit.

1 minute ago, MoJo said:

It's a QNEC, not a deferral, hence it doesn't "consume" any part of hte $18k limit.

Thanks, Mojo. Can you provide a reference for this? I am looking at the following, which seems to suggest that QNEC for a missed opportunity would count towards part of the $18K limit. Would it count towards the $54,000 limit then instead: 

EPCRS Appendix B section 2 .02 F
(F) Special Rule for Brief Exclusion from Elective Deferrals and After-Tax Employee Contributions. An Plan Sponsor is not required to make a corrective contribution with respect to elective deferrals (including designated Roth contributions) or after-tax employee contributions, as provided in sections 2.02(1)(a)(ii)(B) and ©, but is required to make a corrective contribution with respect to any matching contributions, as provided in section 2.02(1)(a)(ii)(D), for an employee for a plan year if the employee has been provided the opportunity to make elective deferrals or after-tax employee contributions under the plan for a period of at least the last 9 months in that plan year and during that period the employee had the opportunity to make elective deferrals or after-tax employee contributions in an amount not less than the maximum amount that would have been permitted if no failure had occurred.

3 hours ago, Tom Poje said:

the corrective amount doesn't show on your W-2 as deferrals either

Tom Poje - Also looking at a previous thread on this topic that you contributed to, found here:

6 minutes ago, IhrtERISA said:

Thanks, Mojo. Can you provide a reference for this? I am looking at the following, which seems to suggest that QNEC for a missed opportunity would count towards part of the $18K limit. Would it count towards the $54,000 limit then instead: 

EPCRS Appendix B section 2 .02 F
(F) Special Rule for Brief Exclusion from Elective Deferrals and After-Tax Employee Contributions. An Plan Sponsor is not required to make a corrective contribution with respect to elective deferrals (including designated Roth contributions) or after-tax employee contributions, as provided in sections 2.02(1)(a)(ii)(B) and ©, but is required to make a corrective contribution with respect to any matching contributions, as provided in section 2.02(1)(a)(ii)(D), for an employee for a plan year if the employee has been provided the opportunity to make elective deferrals or after-tax employee contributions under the plan for a period of at least the last 9 months in that plan year and during that period the employee had the opportunity to make elective deferrals or after-tax employee contributions in an amount not less than the maximum amount that would have been permitted if no failure had occurred.

 

The section of EPCRS you cite governs *if* a plan sponsor must make a QNEC for the missed opportunity (and if the ee has enough time to "make up" the lost deferrals, then the answer is no).  I don't read that as limiting what the ee can defer for what is left of the year....

1 minute ago, MoJo said:

The section of EPCRS you cite governs *if* a plan sponsor must make a QNEC for the missed opportunity (and if the ee has enough time to "make up" the lost deferrals, then the answer is no).  I don't read that as limiting what the ee can defer for what is left of the year....

Thank you, Mojo. Would you agree that that QNEC would count to the $54,000 aggregate Contribution limit?

Yes, it counts for 415 purposes.

8 minutes ago, Mike Preston said:

Yes, it counts for 415 purposes.

Would that be for the current year or for the year with respect to which it is a corrective payment?

Always the year for which it is a corrective payment.  But isn't the case being discussed one where the corrective payment is being made before the end of the year?

 the example under EPCRS (#6) is

QNEC for missed deferral: Employee Y’s missed deferral is equal to the 10% ADP for highly compensated employees multiplied by $130,000 (compensation earned for the portion of the year in which Employee Y was erroneously excluded, that is, January 1, 2006 through June 30, 2006). The missed deferral amount, based on this calculation is $13,000. However, the sum of this amount ($13,000) and the previously made elective contribution ($5,000) is $18,000. The 2006 § 402(g) limit for elective deferrals is $15,000. In accordance with the provisions of section 2.02(1)(a)(ii)(B), the missed deferral needs to be reduced by $3,000 to ensure that the total elective contribution complies with the applicable § 402(g) limit. Accordingly, the missed deferral is $10,000 ($13,000 minus $3,000) and the required QNEC is $5,000 (that is, 50% multiplied by the missed deferral of $10,000). The QNEC is adjusted for Earnings.

so as the example shows, it is the 'missed deferral' that gets reduced, but then the QNEC  of the missed deferral is 50% of that.