Exclude Eligible Employee - Earnings Adjustment

[Guest mac_qka]

Can I use the 10% safe harbor earnings adjustment method when correcting for failure to include eligible employee under EPCRS? The 10% safe harbor earnings is provided for under gap income guidance but I am wondering if I can stretch it to fix this situation?

Thanks.

[mariemonroe]

Rev Proc 2006-27, Appendix B.3.01(1)(a) states, in part:

If an earnings adjustment method in this section 3 is used to adjust a corrective contribution or allocation, that adjustment is treated as satisfying the earnings adjustment requirement of section 6.02(4)(a) of this revenue procedure. Other earnings adjustment methods, different from those illustrated in this section 3, may also be appropriate for adjusting corrective contributions or allocations to reflect earnings.

The earnings method you propose is not set forth in EPCRS. However, if you can get the IRS to sign off on it, it may be "appropriate for adjusting corrective contributions or allocations."

Good luck!