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Hello All, one of plan has After tax contribution and there are allocation conditions for match (1000 hours for Active & last day requirement). In ACP test do we need to include all, irrespective of the allocation conditions as everyone is eligible to make after tax contributions which are tested under ACP test. Thanks!

I just joined a great company as a 401(k) administrator and immediately saw that their annual 401(k) match calculation formula of 25% of first 6% had two failures (1) failed to cap wages at the the 401(a)17 compensation limit and (2) failed to cap the match computation based on the first 6% of wages. They essentially took 25% of deferrals across the board as the company match. $750K overpaid match in 2018 by my calc. Match was correct for those whose effective deferral rate was 6% or less (400 EEs). The match on 600 EEs with higher deferrals than 6% were all overpaid. It is an audited Plan; been around for many years making this mistake. I can see that a VCP filing will be needed. I took a look at Rev Proc 2018-52, 2.07(1)(b), Example 25 and I don't see how a retroactive amendment will work when it's not just a 401(a)(17) failure but compounding computational errors. The company is successful and expensed and shelled out way more than it should have. The company I'm sure they would be more willing to fix going forward than pull funds out of accounts. I'm sure we'd offer to pull out money from executives at a certain level and above if that's what it takes. Has anyone seen such a longstanding mistake and what would be a typical IRS response to the company be with such a huge overpayment? How far back would they make the correction go? What negotiation can be done? Haven't informed ERISA counsel (I'd fire the auditor if it were my decision) yet only working my way up the chain of command at this point. I am a new hire afterall. I just want to have some idea of what the company is facing here before I push harder. Thank you!! https://www.irs.gov/retirement-plans/fixing-common-plan-mistakes-using-a-plan-amendment-for-correction-in-the-self-correction-program

Under EPCRS, plans may not use permissive disaggregation when correcting a failure to timely correct a failed ADP/ACP test utilizing either the QNEC method or the One-to-One correction method. However, it is not clear if this means the coverage testing for the plan must also be re-run without using permissive disaggregation, or if EPCRS is only focused on the determination of which NHCEs share in the QNEC or the one-to-one allocation. In other words, if the coverage test was run using permissive disaggregation, is the correction sufficient even if you do not re-run coverage so long as the ADP/ACP test is re-run without using permissive disaggregation and the corrective contributions are made on that basis? Or must coverage also be run without permissive disaggregation?