Participant directed 401(k) Plan executed an amendment changing Matching Computation Period from payroll-to-payroll to a Plan Year basis (Plan provides 50% match on deferrals up to 5% of Comp).

Plan continued to calculate on a payroll basis and did not provide "true up" contributions for those employees who did not contribute throughout the year, but still deferred above the 5% for the Plan Year.

Section 3.01 (3)(b) of Appendix B of Rev Proc 2003-44 provides an aministrative convenience procedure which indicates that participant-directed Plans with Multiple Investment Funds should use the fund with the highest rate of return for the lost earnings calculation (if most affected employees are NHCEs).

I have heard from some people that the IRS has continually approved the use of a "Plan Level" return in lieu of the highest return methodology (even in participant directed plans). Has anyone else seen this as an accepted method?

Also, if many affected participants are HCEs, what method is accepted?

"(if most affected employees are NHCEs)."
"Also, if many affected participants are HCEs, what method is accepted?"

I use the dictionary on this, since the IRS does not define these terms. If more than 50% of those affected are NHCEs, then using the highest rate if return in the Plan is acceptable. It does not matter if "many" of those affected are HCEs, as long as they are less than 50%.