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There are actually a couple of issues with that statement. The first is that although governmental plans are not required to comply with section 411, they are often required to comply with interpretations of the state or federal Constitution's impairment of contracts clause that may limit not only reduction of past benefits, but reduction of future benefit accruals with respect to existing employees. Thus, reduction of benefits to comply with 415 limits may not be possible even though 411 does not apply. The other issue is that the judgment in this case required the retroactive benefits. If an individual's annual benefit would have been $210,000, if such individual had been a participant from the beginning, I doubt the court would consider the judgment complied with if the individual ended up with a $21,000 benefit due to reductions to comply with 415(b). However, I would agree with your common sense approach. Certainly, if ECPRS applied, the overriding principle is to put the person back into the position that s/he would have been in had the employer done the right thing from the beginning. I would argue that a VCP submission is not required (because the employer complied with the plan's terms to begin with, and simply made a retroactive amendment to the plan to comply with the judgment). But I still think the spirit of the ECPRS rules is that fixing an error should not get you into trouble.

At the 2012 Q and A #23 ASPPA conference the following was asked (with the usual cautionary, such IRS responses do not necessarily reflect an actual treasury position.) Q plan states that, if any contribution would cause the participant to exceed §415, the contribution should be reduced so that it equals the maximum permissible amount. The plan also states any excess should be corrected under EPCRS. The participant defers $17,000, and is given a matching contribution under the plan equal to 50% of deferrals, or $8,500. The plan allocates a profit sharing contribution, which under the allocation method would yield an allocation of $24,750 to Participant A. If the allocation is credited to A's account, his total annual additions exceed the §415© limit by $250. What is the correct administrative procedure? (1) The $250 should be reallocated to other participants, because the sponsor failed to operate the plan within its terms (i.e., the plan says total allocations may not exceed the §415© limit), or (2) now that there is an excess consisting of deferral and employer contributions, $166.67 in deferrals is refunded while $83.33 in match is forfeited, pursuant to the suggested correction method under EPCRS. Would the answer change if the plan did not contain language reducing any contribution that would cause a §415 excess? Proposed answer The plan may rely on the EPCRS procedure. All plans are required to limit annual additions to the §415© limit so that alone does not preclude using the EPCRS correction method. With the elimination of specific correction methods from the §415 regulations, the IRS intended that the EPCRS procedure would be the primary reference point for correcting §415 violations. This also would enable the participant to be entitled to a greater portion of employer contributions, and minimize the amount of the total annual addition that represents an out-of pocket contribution for the employee. Alternatively, the administrator may apply the plan language to treat the $250 of the profit sharing contribution allocated to this participant's account as an improper allocation, and reallocate that amount to the other plan participants who have not reached the §415 limit. IRS Response The IRS agrees with the proposed answer. This is a plan document interpretation issue.