Profit-Sharing Contributions in excess of the deductible limit

[mariemonroe]

I have a Profit-Sharing Plan in which the employer has been making annual contributions = 100% of compensation and deducting the full amount on its tax return - basically ignoring 404(a)(3) which states that deductions are limited to 25% of compensation.

Has anyone experienced correcting this type of failure before through VCP or otherwise?

There is a technical operational failure (failure to follow plan document) because the plan document states that the employer contribution can not exceed the deductible amount. However, there is no example of this type of failure in the Rev Proc so I am not sure what the proposed correction would be.

I would like the proposed correction to be something like this: allow the employer to take back the contributions in excess of the deductible limit without violating the excess benefit rule and waive (or compromise in some way) the excise taxes (which are significant).

Any ideas?

[david rigby]

Probably not reasonable to expect a waiver of excise taxes.