Consequences of omitting employee from 401(k) plan participation

[Guest Steve1]

I had an employee that was with my corporation for 2 years (terminated in early 2005).

Per our plan documents, there are NO restrictions for participation (no 1000 hour requirement, no one year of service, etc.).

We do NOT match contributions.

This employee was never notified about participating in the plan and now there are other "salary" issues being "negotiated", so I want to know what "problems" this 401(k) issue might create.

What possible sanctions do we face for not including this employee ??

Does anyone have IRS code sections or D.O.L. regulations ??

[david rigby]

This may provide a start. http://benefitslink.com/IRS/revproc2003-44.html

See Appendix A.

[E as in ERISA]

Wait until the new EPCRS comes out. It will be better.

[Appleby]

pax,

What if the plan is not subject to the ACP/ADP testing- such as a SIMPLE IRA/401(k) or safe-harbor 401(k)...any recommedations for another starting point?