SCP while under audit

[jpod]

Client's 401k plan is under examination. IRS agent correctly identifies an error previously unknown to the employer; namely due to a problem attributable to the transmission of payroll data, TPA did not count certain non-contributing employees in the ADP and ACP tests. Obviously, this throws the annual testing out of whack.

Does anyone have a sense of how receptive the agent should be/will be to the notion that this is an "insignificant" operational violation that can be corrected via SCP (and, therefore, not subject to any audit CAP sanctions)? Rev. Proc. 2006-27 seems to leave this kind of determination wide open.

[Just Me]

I have heard the IRS say that they will allow an SCP to be done even while under exam. I never had it come up, so I don't know how easily they allow it, though.

[Guest Pensions in Paradise]

From Rev Proc 2006-27, Section 8.01, Self-Correction Program:

This section 8 is available for correcting an insignificant Operational Failure even if the plan or Plan Sponsor is Under Examination and even if the Operational Failure is discovered on examination.

[401_4_ever]

Only if you get the IRS agent to agree it's an insiginificant failure. He/She may call it significant.

From Rev Proc 2006-27, Section 8.01, Self-Correction Program:

This section 8 is available for correcting an insignificant Operational Failure even if the plan or Plan Sponsor is Under Examination and even if the Operational Failure is discovered on examination.