Inclusion of Ineligible Employees

[CLE401kGuy]

Plan excludes HCE's

Employer paid bonuses to participating employees that pushed total pay over the threshold to be an HCE.

At 1/1/16, employer did not communicate to the HCE employees that they were not permitted to contribute.

As opposed to refunding the elective and forfeiting match, can the employer adopt a corrective amendment to permit the HCE's to contribute ongoing. It is the employer's intention going forward to allow HCE's to contribute.

Is this a VCP issue requiring VCP filing and payment to use the VCP program?

Thanks

[Lou S.]

Can I assume the plan covers all NHCEs or is that a bad assumption?

I am not sure if this qualifies for SCP but I believe it would assuming a large majority of NHCEs are already covered and you communicate to HCEs that they are are now covered. The reason I feel this may qualify for SCP and not require VCP is because you are generally allowed to discriminate with respect to 1 HCE or group of HCEs over another without IRS issues.

I would say that VCP would likely be required if there are any NHCEs similarly situated with the HCEs who were allowed in who have been excluded from the plan and you would like have to bring them in probably with a QNEC.

But my analysis of the situation here could be off.

[CLE401kGuy]

The plan currently excludes HCE's and one particular job class (all NHCE's) that makes up about 25% of the workforce. Total covered NHCE's is 100 and there are 3 HCE's (2 of which were permitted to continuing participating after crossing into the next plan year)

No excluded NHCE's were permitted to participate. So the specific facts of the situation seem to permit me to use SCP.

When looking at the schedules to attached for a VCP filing, none of them seem to apply. In Schedule 14568-I Schedule 9 - early inclusion because of missing age or service requirement is an option, but not employee class or status.... In a case where none of the Schedules apply, do you just file the 14568 and use that form alone (with any pertinent attachments) to provide the facts?

Thanks!