EPCRS and failed coverage

[Guest ladycpa]

I have a new client that failed coverage in their ESOP for the plan year ended 9/30/01 under both the ratio and average benefits test. They have a 1,000 hour and last day requirement and they had high turnover this year. We are going to plan on bringing in four people under the fail-safe provisions to pass coverage.

When I review EPCRS for the correction method and which part of the program it should be submitted under it is listed as a demographic error. I agree that it is a demographic error but it seems that this would have to be submitted under the general VCP Program since it is not an operational error. I'm trying to find a way to submit under one of the other programs since the fees under the general VCP are higher than the others.

Any thoughts?

[jpod]

I'm confused. Why is a "correction" necessary if the plan already has a "failsafe" coverage provision?

[Guest ladycpa]

Good point. I should have mentioned that the old plan document did not incorporate the 410(B) fail-safe provisions. The GUST restatement does include the provisions, but it was not effective until 10/1/01. We can not do a retroactive amendment since we are past the 9 1/2 months.

Therefore, we are using the correction of bringing in some of the employees that were not benefitting due to not being there on the last day. Once we have corrected we would like to submit under EPCRS.

Am I on the right track?

[Tom Poje]

one other possibility a lot of people miss.

you indicated plan had high turnover. by chance were any of these HCEs with less than 500 hours? remember, it is optional whether to include/exclude all terminees with less than 500 hours.

many softwares simply assume it is to your benefit to exlude such people. but if there are hces in the group it will help to include all terminees in the testing