Like with late deferral deposits, another problem is the missed deferral opportunity. It usually happens when an employee is supposed to become a participant and the employer forgets that short little fact.
If not corrected quickly, it may lead to corrective employer contributions to properly compensate the negatively affected employee. It’s a common mistake where the employer forgets to include the employee as a. participant after they met the eligibility and entry requirements. It’s one of the reasons that I think entry dates that are on the date eligibility requirements are met or the next payroll period is an absolute mistake because it would. require the employer to be more alert with more entry dates. Anything more than monthly entry dates is begging for trouble.
A simple Excel spreadsheet or better communication with the third-party administrator goes a long way in avoiding these issues.