Operation Failure?

[Guest 401kadmin]

Misinterpretation of the plan document resulted in a few people not receiving an allocation of Money Purchase Pension Plan contribution in various plan years dating back to 1997. The amounts due in most of the prior years is very small, under $200. Would this qualify under the self correct program, and would the lost earnings be determined in the same manner as late 401(k) deposits under 6621(a)(2)?

[Guest jae3207]

More information would be needed to make that determination (e.g. - #of people involved, # of plan years, demographic makeup of correction group (HCE's vs. NHCE's), etc.). Based on this analysis, you will determine whether it is a significant or insignificant failure. Insignificant operational failures can be corrected through SCP at any time. Significant operational failures can only be corrected (substantially or in full) within the 2 year correction period.

On the surface you might want to consider VCP. Also, keep in mind that the correction does not excuse the employer from any liability associated with the excise taxes under IRC 4971 (failure to meet minimum funding standards), so additional issues would need to be addressed as to Form 5330.