Was Your 401(k) Contribution Missed? The IRS Has New Fix-It Rules

A forgotten payroll election can wipe out a year of retirement saving and the employer match that should have gone with it. The IRS has now revised the rules employers use to correct those mistakes, and the changes matter if money never reached your 401(k).

A single missed 401(k) deduction may barely be noticeable on a pay stub. Left uncorrected for months, though, it can mean losing both your own savings and the matching contributions from your employer.

The IRS has updated the framework employers must use when fixing these failures. Rev. Proc. 2026-34, dated October 22, 2026, “modifies and supersedes Rev. Proc. 2021-30” and incorporates correction changes from the SECURE 2.0 Act, enacted on December 29, 2022. Here is what the update means when contributions never made it into your account.

What a Missed 401(k) Election Can Cost, According to the IRS

The IRS procedure includes an example to show how the math works. Employee T elected to defer 10% of pay for 2024, but the election “was not processed.” With annual pay of $60,000, the missed deferral equals $6,000.

Under the standard correction, the employer makes a qualified nonelective contribution, or QNEC, of 50% of the missed deferral. In this case, that equals $3,000. The employer also must make up the lost match of $1,800, bringing the total to $4,800 before any investment earnings.

There is also a tax wrinkle. The QNEC is made pre-tax and “may not be treated as designated Roth contributions (and may not be included in an employee’s gross income).” By contrast, the $6,000 that was never deferred was paid to the worker in regular wages and taxed that way.

Automatic Enrollment Relief No Longer Has a Sunset Date

SECURE 2.0’s Section 350 created Code section 414(cc), which “generally reinstates the safe harbor method” for fixing deferral failures in automatic enrollment and escalation plans without a QNEC. The revised procedure makes four key changes:

• It removes “the December 31, 2023, sunset of the safe harbor correction method”
• It extends the method “to SEP Arrangements and SIMPLE IRA Plans”
• It applies to “terminated employees”
• It requires the corrective match “within a reasonable period” after correct deferrals begin, or would have begun but for termination

To use this approach, the failure cannot continue beyond the 9½-month period after the end of the plan year, and the employer must provide notice within 45 days after correct deferrals start. A matching contribution made by “the last day of the twelfth month” after deferrals restart is treated as reasonable. If the plan’s default investment option loses money, those losses do not reduce the required match correction.

Example 16 illustrates the rule. An employer learned on March 1, 2025, that four workers hired in June 2024 had been left out of the plan. They were enrolled at 3% on April 1, 2025, and received notice on May 1, 2025. No corrective contribution was owed for the missed deferrals. Workers would need to make up the lost savings themselves, which is why the notice must tell them they may increase their deferral rate, “subject to applicable limits under section 402(g).”

Longer-Running Mistakes Can Trigger a 25% Fix

For any plan, a failure corrected within three months does not require a QNEC. If the mistake lasts longer but is fixed within three years after the plan year in which it began, the correction requires a 25% QNEC instead of the higher amount. Eligibility is determined employee by employee: a failure that began in 2023 can use this method through the 2026 plan year, while one that began in 2019 cannot.

Additional Changes the IRS Added After Comments

• Partial years: Some correction methods now explicitly cover “partial plan year failures.”
• After-tax contributions: The reduced-QNEC safe harbor now includes them, at 20% of the missed after-tax amount.
• New calculation: The procedure adds a method for determining the missed deferral when “all non-highly compensated employees are improperly excluded.”

The law also “expands SCP to permit self-correction of Eligible Inadvertent Failures.” In practical terms, employers can fix more mistakes without filing with the IRS. A correction completed by the later of the end of the third plan year after the failure or 18 months after it was identified is treated as reasonable.

How to Spot a Missed Contribution Before It Grows

Correcting the problem is the plan sponsor’s responsibility, but someone has to catch it first. These steps can help:

1. Compare the 401(k) deduction on each pay stub with the percentage you elected.
2. Make sure deposits and the employer match appear on your plan statement.
3. After a new hire or rehire, verify that automatic enrollment actually began.
4. Report any issue in writing to the plan contact. Once you do, corrected deferrals must begin by “the first payment of compensation made on or after the end of the month after the month of notification.”

Former employees are entitled to “the same correction,” though their notice may be less detailed. One common mistake is taking the correction notice at face value. It will show the percentage that was missed and the estimated start date, but it “need not include a statement of the dollar amounts.” You may need to calculate that number yourself and decide whether to raise your contribution rate to make up the difference.