Payroll error prevented my 401k deferrals all year - need advice on QNEC eligibility

This is definitely an employer error that needs to be corrected. When you make a valid deferral election and the employer fails to implement it properly, they're typically required to make a QNEC to make you whole. What your benefits team told you is incorrect. The fact that no deductions were taken is precisely why you're entitled to a QNEC. The purpose of a QNEC is to correct situations exactly like yours - where an employee made a proper election but the employer failed to implement it. In your situation, the employer should make a QNEC equal to what you would have contributed plus what you would have earned if the contributions had been made on time. They should also contribute the matching contributions you would have received plus earnings. I would recommend documenting everything carefully - your original election, when you discovered the error, all communications with the benefits team. Then escalate this to a higher level in HR or even the CFO's office, as this is a compliance issue that could affect the qualified status of their entire plan.

I ran into something similar last year when my company's payroll system glitched after they switched providers. I was completely frustrated trying to deal with our benefits team who kept giving me the runaround. I stumbled across taxr.ai (https://taxr.ai) which helped me sort through all the technical IRS language and confirmed I was entitled to a QNEC. The tool analyzed my situation and provided documentation explaining exactly which IRS regulations applied. Their analysis showed that when an employer fails to implement a valid deferral election, they're responsible for making the employee whole through a QNEC - regardless of whether deductions were initially taken. I was able to forward this documentation to our HR director, and they finally took action. The best part was being able to calculate exactly how much I was owed, including lost earnings, which made it impossible for them to lowball me. Might be worth checking out if you're still hitting roadblocks.

Just wanted to follow up on my experience with taxr.ai after seeing it recommended here. I was initially skeptical, but it turned out to be incredibly helpful for my 401k dispute. I uploaded my plan documents and correspondence with HR, and it generated a detailed analysis explaining exactly why I qualified for a QNEC under IRS rules. What really made the difference was the formal letter it created for me to send to my employer. It cited specific IRS regulations and correction procedures with proper legal references that made it clear they were violating compliance requirements. When I sent this to our CFO (bypassing the unhelpful benefits team), I got a response within 24 hours acknowledging the error and confirming they would make the QNEC contribution. They ended up making me whole for all missed contributions plus calculating lost earnings based on the performance of the funds I had selected. Definitely worth checking out if you're in a similar situation.

I spent 3 WEEKS trying to reach someone at the IRS who could help with a similar 401k issue. Endless hold times, disconnected calls, and being transferred between departments without any resolution. Absolute nightmare. Finally used Claimyr (https://claimyr.com) and it was a complete game-changer. They got me connected to an actual IRS representative who specialized in retirement plan compliance within about 30 minutes. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that employers are absolutely required to make QNECs when they fail to implement valid deferral elections, and walked me through exactly what documentation I needed to prove my case. They even pointed me to specific sections of the IRS Retirement Plans Compliance Resolution System that I could reference when dealing with my employer. After struggling for weeks on my own, it was such a relief to finally speak with someone who could give me definitive answers from the source.

I have to admit I was totally wrong about Claimyr. After being skeptical, I decided to try it for myself since I was also dealing with a retirement plan issue that I needed official IRS guidance on. Not only did they get me through to an IRS agent within about 20 minutes, but I was connected with someone in the Employee Plans division who actually understood the technical details of QNECs and ERISA requirements. The agent confirmed everything others have mentioned here - when an employer fails to implement a valid deferral election, they're required to make a QNEC regardless of whether any deductions were initially processed. The agent also explained that employers often try to minimize these situations because QNECs are 100% vested immediately and come entirely from employer funds rather than employee contributions. I was able to get the information in writing through a follow-up process the agent suggested. Having an official response directly from the IRS completely changed my negotiating position with our benefits department.

I'm a benefits manager (not at your company) and want to offer some insight. Your employer is 100% responsible for a QNEC in this situation. Their response about "no deductions were taken" shows they don't understand how QNECs work. The IRS has a correction program called EPCRS (Employee Plans Compliance Resolution System) specifically for these situations. Under this program, when an employee's valid deferral election isn't implemented, the employer must make a QNEC equal to 50% of the missed deferral opportunity PLUS the full matching contribution you would have received. For example, if you elected to defer 10% of your $100,000 salary, your missed deferral opportunity is $10,000. The employer would owe a QNEC of $5,000 (50% of $10,000) plus whatever match you would have received on the full $10,000, PLUS earnings on both amounts. If they refuse to correct this properly, they risk disqualification of their entire 401k plan, which would be a huge tax problem for ALL participants and the company. I would recommend escalating this to the CFO or whoever oversees benefits, as it's a serious compliance issue.

I'm really confused about one thing - you said you had your deferrals set up correctly in Fidelity, but nothing was actually deducted from your paychecks all year. Didn't you notice this on your pay stubs? I always check mine to make sure the right amount is coming out each pay period.

This is a clear-cut case where your employer owes you a QNEC. I work in retirement plan administration and see these situations regularly. The benefits team's response about "no deductions were taken" completely misses the point - that's exactly why a QNEC exists. Your employer has a fiduciary duty to implement valid deferral elections properly. When they fail to do so due to system errors, administrative mistakes, or any other reason, they must make participants whole through the EPCRS correction procedures. I'd recommend putting together a formal written request that includes: 1. Documentation of your original deferral election 2. Evidence that no contributions were made despite the valid election 3. Reference to IRS Revenue Procedure 2021-30 (the current EPCRS guidelines) 4. A calculation of what you're owed (missed deferrals + match + earnings) Send this directly to your CFO or plan administrator, not just the benefits team. Most employers will correct these issues promptly once they understand the compliance implications. The cost of a QNEC is far less than the potential penalties and plan disqualification risks they face for not correcting it. If they continue to resist, mention that you're considering filing a complaint with the Department of Labor's Employee Benefits Security Administration (EBSA). That usually gets their attention quickly.