One of our clients appears not to have notified a number of part time employees that they were eligible to participate in their 401(k)plan. I could swear I've read in an official (or at least semi-official) source how to correct this. But I can't find any reference to that now in my books (or on this BB). I believe the company must contribute the average contribution rate during that time to those eligible people.

Can anyone confirm this or (preferably) guide me to any relevant citation about this issue.

Thanks.

Revenue Procedure 2001-17 Appendix A .05 provides that the employer must make a QNEC to the plan on behalf of the employee that is equal to the ADP for the employee's group (HCE or NHCE). Same is true for any matching contribution. Should also adjust for lost earnings.