Employee Plans Compliance Resolution System

[Guest Bahrman]

Other than the seven factors (and related examples) listed in Rev. Proc. 2002-47, is there any guidance available on what qualifies as a "significant" versus "insignificant" operational failure?

We have been asked to advise a plan which underpaid matching contributions to some of its participants over the last several years. The error resulted from calculating the contribution on a bi-weekly (payroll) basis, rather than on a plan year basis as required by the plan document. Only 5 to 10% of the participants were affected each year, and the correction for each year is equal to approximately 5% of the total contribution made for that year. We believe a reasonable case could be made that the failures in this case are insignificant and can be corrected under the Self-Correction of Insignificant Operational Failures program. Because it exceeds the two year requirement it is ineligible for correction under the Self-Correction of Significant Operational Failures program.

Any thoughts or suggests on "significant" versus "insignificant" operational failures would be greatly appreciated. :confused:

[Alf]

There is nothing out there that we know about. We think it is important to weigh the risk of adjustments on audit when considering the factors. If you are using a generous correction using the IRS standard correction methods, we worry less about getting challenged on the factors because the IRS is only out the compliance fee, which can't be a big consideration to the auditor.