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BenefitsLink > Q&A Columns > Q&A: Correcting Plan Defects Answers are provided by Attorneys C. Frederick Reish, Bruce L. Ashton, Nicholas J. White and Nicholas J. Waddles of Reish Luftman McDaniel & Reicher, a Professional Corporation. Welcome to the column! Employers who sponsor pension, profit-sharing, ESOP and other kinds of tax-qualified retirement plans are encouraged to ask questions about the procedures that can be followed to prevent such a plan from losing its tax-qualified status, when the sponsor discovers a "defect" in the way the plan has been written or in the way the plan has been operated. For example, an employer might choose to take advantage of the "Voluntary Compliance Resolution (VCR)" program or the "Closing Agreement Program (CAP)," both of which are sponsored by the Internal Revenue Service as a way for employers to avoid the full income tax, excise tax and penalty tax consequences on the employer, the plan's trust and the participating employees that otherwise would arise under the literal terms of the Internal Revenue Code. Answers are provided by Fred Reish, Bruce Ashton, Nick White and Nicholas J. Waddles of Reish Luftman McDaniel & Reicher, a Professional Corporation. Mr. Reish and Mr. Ashton are the co-authors of the Plan Correction Answer Book (click for details), from Panel Publishers. Q&A 168: Can an Extension of the 150-Day Compliance Period Be Granted After a Compliance Statement Has Been Issued? March 6, 2002 Q&A 167: Can the Terms of a Compliance Statement Be Changed After It Is Issued? February 12, 2002 Q&A 166: Correction of Qualification Failures Involving an Excise Tax January 7, 2002 Q&A 165: Earnings Adjustments on Corrective Contributions: Taking Into Account Losses December 21, 2001 Q&A 164: Removing Assets From a Plan To Effect Correction December 3, 2001 Q&A 163: Correcting Qualification Failures In Orphan Plans November 15, 2001 Q&A 162: Documenting a Qualification Failure Under SCP November 1, 2001 Q&A 161: How Does a Plan Sponsor Demonstrate the Practices and Procedures Required by SCP? October 17, 2001 Q&A 160: The Self-Correction Program's Requirement of Established Practices and Procedures October 3, 2001 Q&A 159: Extension of SCP's Two Year Significant Defect Correction Period September 19, 2001 Q&A 158: SCP: Correcting Operational Failures Within The Two-Year Correction Period September 7, 2001 Q&A 157: Operational Failures Corrected By Plan Amendment Under SCP August 17, 2001 Q&A 156: Using Bottom-up QNECs To Correct An ADP Failure Under SCP August 2, 2001 Q&A 155: Self-correcting a Significant Operational Failure in the Absence of a Favorable Determination Letter July 16, 2001 Q&A 154: Self-correction of Defects Discovered On Merger July 5, 2001 Q&A 153: Improper Self-correction of Operational Failure: Resolution of Defect Under Audit CAP June 15, 2001 Q&A 152: Correction of Non-Conforming Hardship Distributions May 16, 2001 Q&A 151: Non-Safe Harbor Correction for Inclusion of Ineligible Employee May 1, 2001 Q&A 150: Safe Harbor Correction for Inclusion of Ineligible Employee April 16, 2001 Q&A 149: Failure of Employer to Timely Sign 401(k) Plan Documents: Prohibited Transaction Issues April 2, 2001 Q&A 148: Correction For Failure of Employer to Timely Sign Plan Documentation March 16, 2001 Q&A 147: Common Correction Methods For An Operational Failure March 2, 2001 Q&A 146: Inclusion of Ineligible Employee February 15, 2001 Q&A 145: Top-Heavy Violation: Self-Correction v. IRS-Supervised Correction February 1, 2001 Q&A 144: When Does a Top-Heavy Violation Occur? January 15, 2001 Q&A 143: Correction of Erroneous Elective Deferrals: Mistake of Fact (Part III) January 2, 2001 Q&A 142: Correction of Erroneous Elective Deferrals Due to Mistake of Fact, Part II December 15, 2000 Q&A 141: Correction of Erroneous Elective Deferrals: Mistake of Fact December 1, 2000 Q&A 140: Proper Determination of the Two-Year Correction Period for Correction of Significant Defects Under APRSC November 15, 2000 Q&A 139: Plan Document Failure Resulting In The Improper Exclusion Of An Eligible Employee From a 401(k) Plan November 3, 2000 Q&A 138: Walk-in CAP Correction for Inclusion of Ineligible Employee in a Profit Sharing Plan October 16, 2000 Q&A 137: Correction for Inclusion of Ineligible Employee in a Profit Sharing Plan October 3, 2000 Q&A 136: Correction of Improper "Refund" to the Employer September 18, 2000 Q&A 135: Operational Failure In 401(k) Plan Regarding Definition of Compensation: Correction Under VCR September 1, 2000 Q&A 134: Operational Failure In 401(k) Plan Regarding Definition of Compensation: Correction Under Reformation CAP August 15, 2000 Q&A 133: Non-Safe Harbor Correction for Failing to Use Proper Compensation to Determine Elective Deferrals And Matching Contributions August 1, 2000 Q&A 132: Program Eligibility for Qualified Plans, and Correction of Interrelated Plan Document and Operational Failures July 14, 2000 Q&A 131: Non-Safe Harbor Correction for Partial Year Exclusion of Eligible Employee in a 401(k) Plan June 30, 2000 Q&A 130: Safe-Harbor Correction of Overpayment in a Profit Sharing Plan June 15, 2000 Q&A 129: Participation of Ineligible Employee in a Section 401(k) Plan: Alternatives for Correction Under APRSC and Walk-In CAP June 1, 2000 Q&A 128: Exclusion of Eligible Employee from Section 401(k) or (m) Plan: Making Safe Harbor Corrections in The Year of The Defect May 16, 2000 Q&A 127: EPCRS: The Meaning and Significance of "Under Examination" May 1, 2000 Q&A 126: Exclusion of Eligible Employees From A Profit Sharing or Stock Bonus Plan: Earnings Calculation Under the Reallocation Correction Method April 17, 2000 Q&A 125: Exclusion of Eligible Employees From A Profit Sharing Or Stock Bonus Plan: The Reallocation Correction Method April 5, 2000 Q&A 124: Exclusion of Eligible Employees From A Profit Sharing Plan: The Contribution Correction Method March 15, 2000 Q&A 123: Correction of Excess Matching Contributions & ACP Test Calculation March 1, 2000 Q&A 122: Correction of Ineligible Deferral and Matching Contributions: ADP and ACP Test Calculations February 15, 2000 Q&A 121: Safe Harbor Corrections For Section 401(a)(17) Failures February 2, 2000 Q&A 120: Applicability of Excise Tax to Safe Harbor Corrections for ADP and ACP Test Failures January 18, 2000 Q&A 119: Safe Harbor Corrections For ADP and ACP Test Failures January 5, 2000 Q&A 118: "Brief Exclusion" of Eligible Employee From Making Elective Deferrals December 16, 1999 Q&A 117: Partial Year Exclusion of Eligible Employees in a 401(k) Plan December 1, 1999 Q&A 116: Correction of Top-Heavy Failures Under APRSC and VCR November 15, 1999 Q&A 115: Self-Correction of Operational Failures for Terminating Plans with Pending Determination Letter Applications November 1, 1999 Q&A 114: Correction of Improper Matching Contribution October 18, 1999 Q&A 113: APRSC Correction of Improper Participant Loan October 5, 1999 Q&A 112: Correction of Improper QDRO Distribution September 15, 1999 Q&A 111: Reformation Under Walk-In CAP to Correct Improper Hardship Distributions September 2, 1999 Q&A 110: Failure to Follow the Plan's Terms Regarding Hardship Distributions August 16, 1999 Q&A 109: Allocating Earnings Attributable to Excess Deferral Amounts: The Alternative Method August 2, 1999 Q&A 108: Allocating Earnings Attributable to Excess Deferral Amounts July 15, 1999 Q&A 107: Correction of Failure to Follow Plan's Terms Regarding Maximum Annual Deferrals July 1, 1999 Q&A 106: Correction for Failure to Cover Employees of a Controlled Group (Part 6) June 15, 1999 Q&A 105: Correction for Failure to Cover Employees of a Controlled Group (Part 5) May 28, 1999 Q&A 104: Correction for Failure to Cover Employees of a Controlled Group (Part 4) May 14, 1999 Q&A 103: Correction for Failure to Cover Employees of a Controlled Group (Part 3) May 3, 1999 Q&A 102: Correction for Failure to Cover Employees of a Controlled Group (Part 2) April 15, 1999 Q&A 101: Correction for Failure to Cover Employees of a Controlled Group (Part 1) April 1, 1999 Q&A 100: Procedures Under Walk-in CAP, Audit CAP, VCR & APRSC for Examining A Plan Sponsor's Compliance Audit Report March 15, 1999 Q&A 99: Procedures Under Walk-in And Audit CAP for Resolving Excise Taxes March 1, 1999 Q&A 98: Correction of a Plan Document Qualification Failure Discovered during the Determination Letter Process February 16, 1999 Q&A 97: IRS Correction In Walk-in CAP to Permit Employer to Reform its Plan Document February 1, 1999 Q&A 96: IRS Correction In Walk-in CAP to Permit Employer to Reform its Plan Document January 15, 1999 Q&A 95: IRS Correction In Walk-in CAP to Permit Employer to Reform its Plan Document December 31, 1998 Q&A 94: IRS Correction In Walk-in CAP for Nonamender and for Failure to Make Minimum Required Distributions December 15, 1998 Q&A 93: IRS Correction for Failure to Vest on Partial Termination December 1, 1998 Q&A 92: IRS Correction for Failure to Properly Vest November 13, 1998 Q&A 91: Correction of Significant Failures Under APRSC October 30, 1998 Q&A 90: Failure to Obtain Participant or Spousal Consent: Significant v. Insignificant Defects Under APRSC October 16, 1998 Q&A 89: APRSC: VCR Correction for Failing to Obtain Participant or Spousal Consent October 1, 1998 Q&A 88: APRSC: SVP Correction for Failing to Obtain Participant or Spousal Consent to A Distribution Subject to The Joint And Survivor Annuity Rules September 15, 1998 Q&A 87: Exclusion of Eligible Employee: Significant v. Insignificant Defects Under APRSC September 1, 1998 Q&A 86: APRSC: VCR Correction for Exclusion of Eligible Employee August 14, 1998 Q&A 85: APRSC: SVP Correction for Exclusion of Eligible Employees August 4, 1998 Q&A 84: APRSC: The Importance of Correction Prior to An IRS Audit (Part II) July 23, 1998 Q&A 83: APRSC: The Importance of Correction Prior to an IRS Audit July 8, 1998 Q&A 82: APRSC: The Importance of Established Practices and Procedures June 23, 1998 Q&A 81: APRSC Correction of Excise Tax on Missed Required Minimum Distributions (Part 2) June 8, 1998 Q&A 80: APRSC Correction of the Excise Tax on Missed Required Minimum Distributions June 1, 1998 Q&A 79: APRSC Correction for Failure to Make Required Minimum Distributions May 26, 1998 Q&A 78: SVP Correction of the Excise Tax on Missed Required Minimum Distributions May 18, 1998 Q&A 77: SVP Correction for Failure to Make Required Minimum Distributions May 11, 1998 Q&A 76: APRSC: Alternative Correction for Exceeding §415 Limits in a Defined Contribution Plan May 5, 1998 Q&A 75: APRSC: SVP Correction for Exceeding the 415 Limits in a Defined Contribution Plan April 27, 1998 Q&A 74: SVP Correction for Exceeding the 415 Limits in a Defined Contribution Plan April 20, 1998 Q&A 73: Alternative Correction for Failing 401(k) and 401(m) Non-discrimination Tests April 14, 1998 Q&A 72: SVP Correction for Failing 401(k) and 401(m) Nondiscrimination Tests April 6, 1998 Q&A 71: Misallocations Resulting from Calculation Errors (Part 2) March 31, 1998 Q&A 70: Misallocations Resulting From Calculation Errors March 23, 1998 Q&A 69: Excess Deferrals and Significant v. Insignificant Defects Under APRSC March 16, 1998 Q&A 68: Correcting Excess Deferrals under APRSC March 9, 1998 Q&A 67: APRSC and SVP Correction for Failing to Distribute Excess Deferrals March 2, 1998 Q&A 66: SVP Correction for Failure to Distribute Elective Deferrals In Excess of 402(g) Limit February 23, 1998 Q&A 65: Correcting §401(a)(17) Violations under APRSC February 16, 1998 Q&A 64: Correcting Excess Contributions under APRSC February 9, 1998 Q&A 63: VCR Correction for Top-Heavy Minimum Benefits February 2, 1998 Q&A 62: SVP Correction of Failure to Provide Top-Heavy Minimums January 26, 1998 Q&A 61: Correcting Top Heavy Errors (part 3) January 19, 1998 Q&A 60: Correcting Top Heavy Errors (part 2) December 15, 1997 Q&A 59: Correcting Top Heavy Errors December 8, 1997 Q&A 58: Q&As 1 to 58 March 16, 1998 Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation. The laws, regulations and court decisions in this area change frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the laws, regulations or court decisions that occur after the date on which that Q&A is posted. Copyright 1998-2008 Reish Luftman McDaniel & Reicher, a Professional Corporation Related links: Plan Correction Answer Book, from Panel Publishers Other Q&A Columns (restricted access)