Plan's definition of compensation has no exclusions, however the employer has been excluding bonuses for all contribution and allocation purposes. Understand that the employer should make a QNEC (and earnings) to adjust for the incorrect deferral, but does a QNEC have to be made for the missed employer contributions? Q & A 133 from the Correcting Plan Defects Column states the missed employer contributions need to be made but not in the form of a QNEC. Q & A 135 expands but not sure if it is saying the missed employer contributions must be in the form of a QNEC? Does Rev. Proc. 2003-44 require a QNEC or just make up the missed employer contributions with earnings and put in the regular PS or Match source?

Without looking anything up, I state that it is the guideline of the IRS when making corrections to put the participant back to a position if the mistake had not happened. Thus, the shorted contributions would be considered for the appropriate source and not be QNEC's.