cjdwyer1

I have a plan that did not want to allow CRDs. A few were paid by the recordkeeper and the Plan Sponsor noticed and shut them off. I assume that the recordkeeper contacted Plan Sponsors to tell them the "default" was to allow unless they communicated that they did not want to offer. When they noticed that some were paid, they shut them off. The recordkeeper tried to recoup the money recently but the employees either didn't respond or had been terminated and had received a full distribution. How should they correct? I suggested having the Plan Sponsor adopt the CARES amendment but to only allow until they were shut off. Any other ideas? If they don't adopt the CARES Act CRD - then don't they have a operation error where they did not follow the plan document?

I agree with Tom. You split the plan into 2 pieces. The statutory employees and the otherwise excludible. Each piece needs to pass 401(a)(4) as if it were a separate plan. i.e. the Statutory pieces only includes statutory employees in its testing and the otherwise excludible piece only includes the OWE in its testing.