Correction for missed last paycheck deferrals

Plan sponsor realized that elective deferrals are not being withheld from terminated employees' last paycheck during 2017. We have confirmed this is inconsistent with the terms of the plan document and I am looking for input on the appropriate correction method under ECPRS. 

Can this be considered an Employee Elective Deferral Failure that does not exceed 3 months under Appendix A Section .05(9)(a) allowing for a QNEC of only missed matching contributions?  Section .05(9)(a) provides 3 conditions that must be met, including that correct deferrals begin for an affected employee no later than 3 months after the failure occurred. Here, deferrals ceased due to employee's termination, so there is no opportunity for correct deferrals to begin. But the failure occurred for less than a 3 month period for each affected employee (one paycheck), which I think is the spirit of  Section .05(9)(a).  Any thoughts?

There have been previous discussions of this.  One of the requirements for the EPCRS safe harbor correction method is that a notice be provided to the participant within 45 days of being given the opportunity to defer.  The IRS website says the following:

Quote

Within 45 days of being given the opportunity to make salary reduction contributions (or the commencement of auto-enrollment contributions), the affected participant must receive a special notice. See Appendix A.05(9) discussed in Rev. Proc. 2016-51 for details as to the specific content that must be in this notice. If the participant terminates employment before the notice is provided, then this requirement has not been met.

https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-eligible-employees-were-not-given-the-opportunity-to-make-an-elective-deferral-election-excluding-eligible-employees

The old brief exclusion correction required that they be eligible to defer for at least the last 9 months of the plan year, so it doesn't apply either.  If you want to stay with one of the pre-approved correction methods in the Rev. Proc., there will need to be a QNEC to correct the missed deferrals.

This is informal guidance taken from the IRS website link shown in the above post. Some may argue that it is not required to be followed (at your own risk).

Correct deferrals finally begin by the first payment of compensation made on or after the earlier of:

• The last day of the second plan year after the plan year in which the failure first began for the affected employee, or the last day of the month after the month the affected eligible employee first notified the plan sponsor; and
• Within 45 days of being given the opportunity to make salary reduction contributions (or the commencement of auto-enrollment contributions), the affected participant must receive a special notice. See Appendix A.05(9) discussed in Rev. Proc. 2016-15 for details as to the specific content that must be in this notice. If the participant terminates employment before the notice is provided, then this requirement has not been met.