EPCRS

Hello everyone. Client wants to put in 100% of missed deferral instead of 25% under EPCRS. May a client do that or would the 75% be considered a non-elective contribution?

Try VCP

The correction methods listed in the EPCRS Rev. Proc. are pre-approved correction methods.  Other correction methods can be used provided they are reasonable and appropriate [Rev.Proc. 2021-30 6.02(2)].  "Reasonable and appropriate" is a facts and circumstances determination.  Also keep in mind that the correction method used must be applied consistently to the same type of failure for the plan year. [6.02(3)] 

So, if the client wants to  provide 100% of the missed deferral, is that reasonable and appropriate?  It's a judgement call.  If the only ones receiving the correction are HCEs, I think it probably isn't.  If it's only going to NHCEs, I think it is.  Of course, the IRS can second guess your correction if you use something other than a correction listed in the current Rev. Proc..  The percentage of missed deferral to deposit listed in EPCRS has changed over the years.  Prior to Rev. Proc. 2006-27, the IRS pre-approved correction was to use 100%. So, at least at one point, the IRS thought 100% was reasonable and appropriate.

Also, you aren't required to use the safe harbor correction of 25% if it applies. You could use the other listed correction of 50% and still be using a pre-approved correction method.

Thank you Kevin. I very much appreciate your thoughtful input.