Ineligible use of SCP

[BTG]

Assume a significant failure that goes back more than two years. Clearly the plan sponsor is ineligible for SCP, and is required to use VCP to correct. Question: What are the consequences if the plan sponsor uses SCP anyway? Would the plan technically be disqualified even though the error was corrected? (For this particular error, the substantive correction method is set forth in the Rev. Proc.)

[PensionPro]

The Service retains discretion and is under no obligation to treat the failure as having been corrected if it is discovered upon examination. While it depends on the circumstances and the mindset of the examiner, the plan may be required to correct the failure (in a manner acceptable to the Service), pay a sanction, and enter into a closing agreement.

From RP 2008-50: "Appropriate use of programs. In a particular case, the Service may decline to make available one or more correction programs under EPCRS in the interest of sound tax administration."

[Guest Sieve]

I'd agree with PensionPro. If the plan has not been corrected using the proper EPCRS procedure--e.g., your significant failure corrected after the time period permitted in EPCRS--then I would suggest that you are in the same position that you would have been in had you corrected prior to the issuance of EPCRS: not corrected at all, and subject to a closing agreement and its large sanctions.

[BTG]

Thanks guys. As much as I was hoping for a different answer, I have to agree with your analysis.