Multiemployer MPPP Nondiscrimination Issue

[luissaha]

I have a strange case involving a multiemployer money purchase plan. One of the participating employers covers non-bargaining unit employess, some of whom are highly-compensated. It appears that the employer will not satisfy the nondiscrimination requirements of IRC section 401(a)(4) due to certain highly compensated employees receiving excess contributions. It looks like this has been happening for several years. Two questions in this regard: 1) Does anyone have any insight into the appropriate correction method?; and, 2) 1 of the highly-comped individuals who has received the excess contributions has now retired and requsted a distribution. Can the plan deny the distribution request pending resolution of the problem? Any help would be appreciated.

[Tom Poje]

a failure to satisfy nondiscrimination (401(a)(4) or 410(b)) is a demographic failure, generally requiring a corrective amendment to increase benefits, as permitted under 1.401(a)(4)-11(g). however, you have passed the deadline of correcting within 9 1/2 months of pye. 5.01© of EPCRS

Because its a demographic failure (rather than an operational failure) you can't correct under SCP, so you can only correct under VCP. (4.01(2)) of EPCRS