Correction of ASG Problem - failed to include eligible employees; probably fails discrimination testing

[Christine Roberts]

For an employer that failed to recognize it was part of an affiliated service group (ASG) and thus failed to include eligible employees and/or failed discrimination testing on an ASG basis, is EPCRS available under Rev. Proc. 2003-44?

I am not aware of any express correction methods for ASGs or controlled groups, but wouldn't the consequences of an unrecognized ASG or controlled group, as mentioned above, would seem to fall squarely within the Rev. Proc. and be susceptible to self correction?

[Mike Preston]

A failure to recognize the existence of an ASG does not mean the plan automatically fails one or more qualification requirements. It is perfectly possible for the plan to still pass 410(b), 401(a)(26), 401(a)(4) including ADP testing, etc.

However unlikely that may be, it is nonetheless possible.

Now, if what you are saying is that the plan did indeed fail one of the qualification requirements I agree with you that correction of a qualification requirement is what EPCRS is all about.

[Christine Roberts]

As failure to meet minimum coverage and or nondiscrimination failures are deemed to be demographic failures, the Voluntary Correction Program, but not self-correction, is available under EPCRS, I have confirmed.

[Mike Preston]

Correct, I missed the self correction part and was only responding generally with respect to EPCRS. Demographic failures are not eligible for SC. However, it is not 100% that a demographic failure exists until the testing is done.