correcting a 410(b) coverage failure

[Guest Elliot W]

Company A sponsors a safe harbor 401(k). We just discovered that because of an unknown stock attribution (husband & wife) Company B is part of a controlled group with Company A. Company B did not adopt A's plan. We tested coverage under 410(b) and it fails.

We already used "otherwise excludable" and it did not help. What do you see as the minimum correction required. Note that this will end up in VCP since there may be past years involved.

[Jim Chad]

FWIW I think you could amend the plan to include other employer. Then look at who you want to be eligible and bring in enough people to pass coverage.

[Guest Elliot W]

FWIW I think you could amend the plan to include other employer. Then look at who you want to be eligible and bring in enough people to pass coverage.

I agree that this would be the core correction. However, there are multiple years involved which means going in under VCP. I spoke to an IRS VCP reviewer and this person confirmed that we would need to amend retroactively and make contributions under the "missed employee" procedure. Going back to your answer, I agree that it would be worth trying to minimize eligiblity, but I guess the trick will be to convince the service that this is an acceptable correction. "John Doe" submission, here we come!

Thanks for your thoughts.