Compensation is by far the biggest issue for plans and potential compensation errors are numerous and varied. A plan sponsor must operate its plan according to the terms of its plan document. If elective deferrals are too high, the excess gets distributed to the employee. If the error results in excess matching or profit sharing, the company forfeits the excess. If the error results in an under contribution, a corrective contribution must be made for the affected participants.
As always, the plan must adjust required distributions, forfeitures and corrective contributions for earnings.
