Contributions to 457s

Q: An employee of a non-governmental hospital (employed in July 2016) contacts you just before the end of the year upset that he were not aware that he could have made a $18,000 deduction to add to his 457(b) for 2016 (he is a highly-compensated eligible employee). He wanted it taken out of his next paycheck and corrected for a 2016 deduction. You explain this was not permissible, to your knowledge. You are not sure how the employer advises the employees that they are eligible for this, but assuming they did not advise the employee, is there any method of correction?

A: Because the employer cannot exclude any employee in the eligible top hat group, they would need to make an employer contribution on behalf of that employee in the amount of $18,000, as a corrective contribution. It will be treated as a salary reduction contribution for 2017! But before the employer follows through with this correction, make sure that the next payroll was not for 2016, but paid in 2017, in which case it might be possible to still do the salary reduction for 2016.