Safe Harbor for corrections of employee elective deferral failures

Under current law, plans with automatic enrollment and automatic escalation features could be subject to significant penalties for mistakenly missing a deferral contribution for an employee. New rules eliminate the penalty for this mistake if the following conditions are met:

• A 45-day notice is given to the affected employee
• Correct deferrals commence within 9 ½ months after the end of the plan year
• The employer provides the employee with any matching contributions that would have been made if the failure had not occurred