SCP Correction by Plan Amendment

[jpod]

You can use SCP to correct by plan amendment in just a few circumstances specified in Rev. Proc. 2013-12. One is where you have allowed hardship withdrawals (on a nondiscriminatory basis), but the plan didn't permit hardship withdrawals. You can amend retroactively to permit the hardship withdrawals allowed, without going through VCP.

What if the plan did allow for hardship withdrawals, but in operation you allowed them on a more liberal basis not permitted by the plan (but still consistent with the applicable rules for hardship withdrawals and on a nondiscriminatory basis). Can you amend your existing hardship withdrawal rules retroatively to match your plan operation without going through VCP, or can you do this through SCP ONLY if your plan didn't allow for any hardship withdrawals? Read literally, it looks like you need to go through VCP, but the logic of that escapes me.

[Kevin C]

I doubt you will find a definitive answer. If you are leaning towards correcting under SCP, Section 6.02(2) of the Rev. Proc. may give you some comfort.

(2) Reasonable and appropriate correction. The correction should be reasonable and appropriate for the failure. Depending on the nature of the failure, there may be more than one reasonable and appropriate correction for the failure. For Qualified Plans and 403(b) Plans, any correction method permitted under Appendix A or Appendix B is deemed to be a reasonable and appropriate method of correcting the related failure. Any correction method permitted under Appendix A or Appendix B applicable to a SEP, or a SIMPLE IRA Plan is similarly deemed to be a reasonable and appropriate method of correcting the related failure. If a plan has a different but analogous failure to one set forth in Appendix A or B (such as the failure to provide a matching contribution by a governmental plan that is not subject to §401(m)), then the analogous correction method under Appendix A or B is generally available to correct any failure. Whether any other particular correction method is reasonable and appropriate is determined taking into account the applicable facts and circumstances and the following principles:

Another option is to contact the IRS. The IRS has done phone forums on EPCRS several times. The handout for the 2/21/2013 forum lists contact information for the speakers.

http://www.irs.gov/pub/irs-tege/epcrs_changes_phoneforum_presentation.pdf