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At this risk of sounding like I'm just trying to sell our wares: Our firm wrote a text on correction programs for ERISApedia that can be purchased. If interested, go to ERISApedia.com. We also did a video certification program for NIPA (nipa.org). Having said that, I really recommend that you at least associate with someone who knows how to do plan correction work on your first venture into VCP-land. There are a lot of arcane rules about the filing, as well as things that people have learned over time that are good ideas or bad ideas for ways to approach the correction programs. Again, if you think that I am making this recommendation just to get business, contact me, and I'll refer you to another law firm for assistance. I'd rather send you in the right direction. Last but not least, kudos to Justanotheradmin for suggesting that the plan be fixed prospectively. Stopping the bleeding is one of the "best practices" things that people who do a lot of correction work always preach. Good luck!

Focusing on the PS allocation, if the allocation conditions say a participant who works more than 500 hours will get a PS allocation regardless of whether the participant is active at plan year end, then modifying the definition of compensation used in the PS allocation for a terminated participant in a way that reduces their PS benefit would result in a cutback of the accrued PS benefit for that participant.

I think @jsample is referring to an "unallocated suspense account" rather than a forfeiture account. I don't recall where this is discussed, but I don't think its EPCRS. If I remember it correctly, the excess is moved to an unallocated suspense account and is not an annual addition. You then have to use the assets in the unallocated suspense account before you make any further contributions, and they are an annual addition when allocated. So from a deduction perspective, you can deduct it when allocated, but not when deposited.

Have you reviewed the 8955-SSA on which their benefits were reported to confirm it is an error on SSA's end?

Thanks for the comment and I should have made that point clear. Yes, I took a look at the 8955-SSA that we filed and the amounts entered were correct. But the letter mailed to the participant is the one that added the two trailing zeroes.

I agree with Paul, you'll have anti-cutback issues. As justanotheradmin had brought up, is changing the comp definition in an "individual allocation class" plan, actually "going to do much"? Especially if the gateway happens to be 5% of 415 pay anyway. It "feels" like maybe you'd be reducing how much counts as SH, versus PS, out of the same overall floor total allocation for folks.

A good starting point is the IRS web site: https://www.irs.gov/retirement-plans/voluntary-correction-program-general-description This site also will lead to some pages specific to 403(b) plans. For example: https://www.irs.gov/retirement-plans/403b-plan-fix-it-guide If you are looking for a gold-standard resource, among your best bets are the ERISA Outline Book, Wolters Kluwer, or ERISApedia. Be prepared to pay for a subscription, but the value of the guidance and time-savings are worth every penny.