PEO - not in correct document type

[John Feldt ERPA CPC QPA]

We were just been informed that a client is actually a PEO. They have been for several years (since 2003). Their plan is not in a document that supports a PEO plan (multiple employer plan).

Can this be corrected via EPCRS?

[J Simmons]

Would the PEO's use of the prototype mean that the PEO has an individually designed plan document (rather than a prototype), but at least has a plan document? That would affect the restatement cycle, but if the language of the prototype specifies the prototype-level sponsor the ability to amend and that amendments apply to the PEO's adoption, you'd have the updates as well if made by the prototype-sponsor.

[Guest Sieve]

14FKBC --

Most plans--such as prototype plans--do not support a multiple employer plan. Participating employers generally must be in a controlled group or affiliated service group relationship with the plan sponsor (unless the plan is a volume submitter prototype style document or, with appropriate forethought, an individually-designed plan--a mere prototype will not work). Therefore, there is generally would be an operational failure of failing to follow the terms of the Plan, and therefore none of the other unrelated employers have a plan.

It should be correctable through EPCRS as a failure to follow plan terms. Retroactive amendment of the plan to permit non-related employers to adopt the Plan ought to be permissible as a correction.

[Kevin C]

Amending an M&P plan in a way that causes it to be considered an individually designed plan does not necessarily mean you are not eligible for the current 6 year cycle for pre-approved plans. Are they considered a prior adopter? Did they timely sign a form 8905? Even if they didn't, look at Section 17 of Rev. Proc. 2005-66, especially 17.09 and example 8. You will also want to look at Section 19.