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Error in 2009 good faith 403b document


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Eligible charitable organization signed (without reading or counsel) a "good faith" 403b plan document in 2009 as mandated by IRS.

2009 document erroneously provided immediate eligibility for the ER match despite the plan having been operated since 1992 using a permissible 1 year eligibility requirement.

ER discovered the error when they recently received the vendor's preapproved 403b document which is to be retroactively effective to 2010.

Since the 2009 document was only to be an interim "best efforts" stopgap measure, can they simply correct the error retroactively in the new preapproved document or do they have an operational error that has to go through VCP?

 

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I suspect you will get different opinions on this. I've heard at least one ERISA attorney describe the process as a "get out of jail free" card where such errors can be retroactively corrected via the restatement. Not necessarily sure the IRS would agree.

Did the SPD correctly describe the matching provision, as well as any other employee communications?

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Whatever tax law (including an IRS nonenforcement policy) might provide about a plan’s tax treatment, it doesn’t end an employer’s exposure to providing the benefit the written plan promised.

 

Yet some employers might hope one’s employees and former employees remain unaware of what they were promised.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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B- I've heard the same comment about the employer's opportunity to retroactively correct anything during the restatement period which led me to post the question.

FGC- The communications to employees support the ER intent so it doesn't appear we have a major issue there.

Thanks

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On ‎1‎/‎16‎/‎2019 at 1:29 PM, AMDG said:

To draw what I think is the correct conclusion from the link very helpfully provided by AMDG (who has the best avatar picture or whatever the heck you call it I've seen so far on the site), I think your facts are like Example 4, so you need to ask for a retro amendment in VCP. If your SPD and other employee communications strongly support the way plan was operated, you should get the correction you request based on prior experience.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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