VCT for Universal Availability Failure

[Guest Brennan]

Anyone have experience in correcting universal availability failures through VCT? Does IRS require correction similar to the standard Appendix B correction for the exclusion of eligible employees from a 401(k) plan (i.e., require an employer contribution equal to the average contribution by participating employees)?

[mbozek]

I dont know if there is any way to correct this failure because a 403(B) plan is not a qualified plan, hence all participant's accounts are not taxed because of the failure to comply with a requirement for 403(B) plans. The penalty for not making salary reduction available to all employees who work at least 20 hours a week is that the employees' salary deferrals are included in the employees compensation for each year the plan violates the universal availability rule. You need to check the IRS correction procedure for 403(B) plans.

[Guest Brennan]

The failure to comply with 403(B)(12)(A)(ii) is correctable under EPCRS (it is listed as an operational failure). I am looking for insights into what the IRS requires for full correction (to avoid the adverse tax consequence for other participants).