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PainPA

Roth in Plan Doc but never wanted to offer it

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Plan Admin/Trustee did not want to offer Roth.  Roth was added during the 2016 restatement in error (?) and was not found out until now.

So an employee selected roth on the enrollment form but the administrator went back to them and said we do not offer roth and then the employee placed the same percentage in pre-tax but never crossed out the roth.  So everything moved forward and the employee did not miss $1 of the safe harbor match.

The plan has as internal audit and this employee was selected.

What is my legal correction?

Everything I am reading relates to missed deferrals, missed entry, missed eligibility..... and how to fix..... making up the difference....

Basically I want to do a retro amendment... just not sure... any ideas....

 

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You're not going to just amend to "turn off" the Roth going forward? 

Does the W-2 for the employee show Roth deferrals, or pre-tax?

I'd go in under VCP - tell the IRS, hey we never expected there to be Roth, nobody (other than this guy) even asked about it, etc.  If all your other documentation supports the fact that the document was done with the mistake and there was no other expectation, they might give you the okay.  I guess there's some difference to the appeal you'll make, depending on the rest of the fact pattern regarding how those amounts did go in.

 

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PainPA, although your facts are a little light on detail, I tend to agree with Bri. Although not completely clear, it sounds like, after the cajoling, the employee intended to do pre-tax, so leaving the Roth box checked was just a clerical error and the employee got what he or she ultimately intended, i.e. pre-tax. However, the administrator's telling the employee that he or she could not do Roth when the plan provided for it was a failure to follow plan terms, so probably does need correction under EPCRS. If it's within 2 years, you may be able to creatively self-correct.

I would not do a retro amendment because it would not appear to fit within the retro amendment guidelines of 2019-19 and therefore would just add to your problems.

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The W-2's show the pre-tax correctly and balance out to the trust allocations and all are timely.

The plan administrator just did not know that roth was mistakenly added to the plan document and when an enrollment form was completed by an employee for a roth deferral he would consult with them that Roth is not an option in the plan and they would correct.  So there was never a $1 entered into the trust for roth and the match was never missed or late.

 

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