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VCP & Did not let someone into the plan


jeff77

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Have a situation where we were asked the correction for a plan that has 2 year entry (assuming PS only).  Was a solo until they hired someone full time in 2010. The person should have been eligible in 2012 according to our calculations.  So we are assuming that there would be 5 full years they would need to give a PS contribution. 

1. Would this be corrected under VCP?  And if yes I don't think there is a cookie cutter type application process correct?

2. Would the correction be to give a contribution needed to pass testing based on the allocation method defined in the document plus earnings?

 

TIA

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Yes, yes, and yes.

The first thing I would do is ensure the years of service are actually measured correctly (e.g. the person hired in 2010 actually worked the appropriate number of hours during the appropriate computation period in order to earn the year of service).  Once you have the year of service and entry dates, then your approach would be to make them whole my funding the contributions.

Do not forget that during those previous years the plan would've been subject to ERISA; so revised Form 5500s may be in order (if for no other reason than an additional common-law employee being covered by the plan).

Good Luck!

CPC, QPA, QKA, TGPC, ERPA

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