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Ask the Experts September 10, 2024
Do Corrections Differ Between Missed Elective and Missed Auto-Enrollment Deferrals?
Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.
Reported by PS
Q: I noticed in a prior Ask the Experts column a probable difference between correcting 403(b) missed elective deferrals and missed automatic enrollment deferrals: a window of 9.5 months after the plan year during which the error occurs, for correction without having to make up missed deferrals, unless the employee notifies the employer of the error, a situation in which a narrower window applies. Are there other significant differences between correcting a missed elective deferral and a missed automatic enrollment deferral?
Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:
A: Yes. If the plan does not have automatic enrollment, the plan only has a window of three months after the failure occurred to make a correction without having to make up missed deferrals (unless the employee notifies the employer of the error, in which case a narrower window applies).
In addition, the SECURE 2.0 Act of 2022 expanded the 9.5-month safe harbor for automatic enrollment plans to apply to terminated employees—subject to adjusting the correction notice for terminated employees to remove the reference for restarting deferrals and making up contributions.
Also, SECURE 2.0 requires that the corrective matching contribution for automatic deferral errors occurring on or after January 1, 2024, be made within a “reasonable period.” IRS Notice 2024-2 provides that a reasonable period depends on the facts and circumstances, but generally will be treated as reasonable if made within six months after correct deferrals start.
Matching contributions for all other non-automatic-enrollment-deferral errors must be made by the end of the third plan year after the year in which the deferral error first occurred.
NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.
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