The IRS has recently issued three new, less expensive safe
harbor procedures for correcting missed elective deferrals. These
new procedures require either no employer corrective
contribution to make up the missed elective deferrals,
or only a 25% contribution, depending upon how
soon detection of errors and correction occurs.
The new procedures are intended to address the
"windfall" that employees receive when they collect their
full pay and also receive the current 50% make-up corrective
contribution, and to encourage plan sponsors to adopt automatic
contribution and escalation arrangements.
No employer corrective contribution to make up
for missed elective deferrals is required if correct
deferral amounts begin to be deducted from future
paychecks by the first paycheck on or after:
