Inclusion of employees of nonadopting employer 401k

[Locust]

Company A had a 401(k) plan. In 2006 employees of Company B, which is considered a single employer with Company A, were allowed to make elective contributions, but Company B had not adopted the plan in 2006.

Is there some way to correct this (now in 2007) without a huge amount of effort?

I see that you can correct inclusion of employees who did not meet age and service requirements by a retroactive amendment and a determination letter request, but the reason these employees shouldn't have been included is because the employer hadn't adopted the plan (not because they didn't meet age/service conditions).

Is it too late to make a retroactive amendment under general remedial amendment period rules? I think it may be because this would probably be characterized as a discretionary amendment and we're past the end of the Plan Year.

I'm not even sure if this qualifies for VCP.

This seems like something that ought to be correctible because the companies are a "single employer," and employees weren't hurt.

Any words of wisdom would be appreciated.

[WDIK]

Is the document a prototype? What language does it contain with regard to a controlled group situation?

[Locust]

WDIK - the document says that an Affiliated Employer will become a Participating Employer if it adopts the Plan "by a properly executed document evidencing said intent and will."

[Just Me]

We had exactly the same situation. IRS says this is correctable under VCP, with the only correction being retroactive adoption of the plan by the employers who were participating but didn't formally adopt (assuming, of course, that the intent is to have this employer participating). No self correction appears to be available.