Correcting ADP Failures

[kgr12]

Employer fails to perform ADP test in 2001-2006. Once discovered in 2007, the ADP test is performed and it turns out the ADP test was failed in 5 of those 6 years.

For now I'm considering the failure to be significant under the EPCRS Rev. Proc., so that leads us to a VCP correction since we're too far out time-wise on several of the years to use self-correction. The 1-to-1 correction method is quite costly, and the straight QNEC method is doubly so.

Two questions:

1. Anyone have any success in getting the IRS to accept any alternative correction methods for ADP failures aside from the two sanctioned methods?

2. Does either one of the two sanctioned correction methods or an alternative method have to be specifically authorized under the plan document in order to be used?

Thanks in advance for your input!

[401_4_ever]

I've never tried anything other than the straight QNEC or 1 to 1 QNEC, but I doubt anything else would work. What did you have in mind? I would doubt that straight distributions would work.

For your second question, I guess it would depend on what you had in mind to correct. The main two options wouldn't need changed document language. If you do something goofy, you could include in the submission a request to retro-amend the document & request a determination letter alongside it.

[jpod]

Extremely unlikely that the IRS will approve anything in VCP other than the prescribed correction methods. If you want to take a shot proposing something else, I suggest doing it on a john doe basis. I don't know what that something else might be without knowing more facts. What are the numbers of HCEs and NHCEs, roughly?

[rcline46]

Am I safe to ASSUME you did every variation of possible tests to get the best results? Like using a 414(s) definition of pay, pay while a participant, Statutory exclusions - everything?