Correcting automatic contribution errors

Any plan or arrangement shall not fail to be treated as a plan described in sections 401(a), 403(b), 408, or 457(b), as applicable, solely by reason of a corrected error.

For purposes of this subsection, the term “corrected error” means a reasonable administrative error—

(A) (i) made in implementing an automatic enrollment or automatic escalation feature with respect to an eligible employee (or an affirmative election made by an eligible employee covered by such feature), or (ii) made by failing to afford an eligible employee the opportunity to make an affirmative election because such employee was improperly excluded from the plan], 3 and

(B) that is corrected prospectively by implementing an automatic enrollment or automatic escalation feature with respect to an eligible employee (or an affirmative election made by an eligible employee) determined in accordance with the terms of an eligible automatic contribution arrangement (as defined under subsection (w)(3)), provided that— (i) such implementation error is corrected not later than— (I) the date of the first payment of compensation made by the employer to the employee on or after the last day of the 9½ month-period after the end of the plan year during which such error with respect to the employee first occurred, or (II) if earlier in the case of an employee who notifies the plan sponsor of such error, the date of the first payment of compensation made by the employer to the employee on or after the last day of the month following the month in which such notification was made, (ii) in the case of an employee who would have been entitled to additional matching contributions had any missed elective deferral been made, the plan sponsor makes a corrective allocation, not later than the deadline specified by the Secretary in regulations or other guidance prescribed under paragraph (3), of matching contributions on behalf of the employee in an amount equal to the additional matching contributions to which the employee would have been so entitled (adjusted to account for earnings had the missed elective deferrals been made). (iii) such implementation error is of a type which is so corrected for all similarly situated participants in a nondiscriminatory manner, (iv) notice of such error is given to the employee not later than 45 days after the date on which correct deferrals begin, and (v) the notice under clause (iv) satisfies such regulations or other guidance as the Secretary prescribes under paragraph (4).

Such correction may occur before or after the participant has terminated employment and may occur without regard to whether the error is identified by the Secretary.

The Secretary shall by regulations or other guidance of general applicability prescribe—

(A) the deadline for making a corrective allocation of matching contributions required by paragraph (2)(B)(ii),

(B) the content of the notice required by paragraph (2)(B)(iv),

(C) the manner in which the amount of the corrective allocation under paragraph (2)(B)(ii) is determined,

(D) the manner of adjustment to account for earnings on matching contributions under paragraph (2)(B)(ii), and

(E) such other rules as are necessary to carry out the purposes of the subsection.