In 2001, Company X failed to permit Y number of eligible employees to make elective deferrals under X's 401(k) plan. Under Rev Proc 2003-44, one method of correcting is by contributing a QNEC equal to the ADP for the group in which the excluded employee would have fallen, plus earnings. However, for 2001, X does not have the ADP/ACP test due to a change in recordkeepers. What should be done to correct this?

1- they'd better get the 01 test results.
2- you might be too late to self-correct w/o the service approval, and the service will definitely want to see the 01 test before approving the method of correction.

Thanks,

In response, I was wondering about the possibility of contributing a QNEC equal to the average of the ADP results for the group in which the employees belonged (in this case, all NHCEs). If there is not a great deal of variation in the test results, perhaps an averaging will be the next best thing.

As for self-correction, I would tend to view this as an insignificant correction given the small number of participants who were impropoerly excluded from participation.