SIMPLE IRA problem

[betheeg]

A potential client has a SIMPLE IRA. In July 2005, 2 newly eligible employees enrolled. Financial Advisor gave the employer the new account numbers to make deposits. The account #'s got switched (employer doesn't know if Financial Advisor gave them wrong or she mixed them up). The error was discovered in January 2008, but the deposits for these 2 employees have gone in switched since July 2005. Total contributions of $9,000.00 (less than 3% of plan assets).

The employer has attempted to correct problem with the investment company since dicovering it in January 2008. The investment company has the capability to go back and "redo" the deposits in both accounts so that gain/loss would be correct. They told the employer the correction would be made. They asked for and were given signed letters from the participants involved and a breakdown of the contributions. They have been stalling for 6 months and have now sent the employer a letter from their compliance department stating that the employer needs to go through the VCP and that they will not process any corrections without a compliance letter from the IRS stating that the correction is allowed.

1. Can the investment company require that to make a correction?

2. Couldn't the employer use self correction since this is an administrative error that can be corrected to the penny?

Thanks in advance for any help on this.

[QDROphile]

The investment company only has to comply with the terms of its agreements. It can agree to extraordinary matters on any terms that it likes.