Possible Scriveners Error in Document

[cpc0506]

We recently became the TPA for a plan that has a Hartford Document. The document was restated for EGTRRA timely.

Client provided end year census data. Client has been making match contributions based upon a specific definition of compensation. We questioned the amount of match calculated based on the plan paramaters we entered into our system from the EGTRRA document.

We learned that the Client has been using the same definition of compensation that was in the GUST document and all prior documents. When the document was restated in 2009 by Hartford, a different definition of compensation was used in the EGTRRA restatement. As a result, the definition of compensation used in 2009 and 2010 and 2011 has been wrong.

(Not sure why the auditors did not pick this up as it is an audited plan??)

What recourse does the Client have? Is VCP the only option? How would you handle this situation? Can we restate the document with an effective date of 1/1/2009? Can you do a retroactive amendment?

[QDROphile]

The sponsor or fiduciary should get advice about how to address the situation.

[cpc0506]

The sponsor or fiduciary should get advice about how to address the situation.

The plan sponsor is looking to us for advice....

[rcline46]

Kathy, the IRS does not like scrivner's errors because there is a duty to understand your document and follow the terms. Therefore it is unlikely they will approve a retroactive amendment.

Under EPCRS you will have to say how many are affected by the change and whether their contributions should increase or decrease (plust lost earnings). Also, unless it is a Safe Harbor definition of pay, you will have to do the 414(s) test to prove non-discrimination. As an audited plan you are looking at an IRS fee of $2,500 to $5,000 or more plus the preparation time for the submission.

If the use of the pay in the document creates an increase due, how much will that cost? Considering the IRS may reject the filing anyway is it worth it to even file?? That is a business decision.

You will need an ERISA attorney to guide you through this kind of VCP filing as there is a lot involved. It is not a simple situation. You may want to even do a John Doe filing to keep your options open.

[QDROphile]

"The plan sponsor is looking to us for advise...."

On what basis are you going to advise if this is where you start?

[jpod]

I agree with QDRO's implied message. You've identified the issue and alerted your client, so you've done your job, admirably. Now, it's time for the lawyers to step in. You have qualification issues here as well as possible Title I ramifications, and possibly a claim against the person(s) who played a role in developing the EGTRRA document and/or the auditors. All of these matters need to be addressed, both technically and strategically, by counsel.