Operational Failure - 401(k) Plan

[Belgarath]

Don't have all the facts yet, so certain assumptions are being made.

A new one to me - plan restated for PPA, and included a provision for Roth deferrals. SPD's, etc., apparently were properly distributed to employees.

The Employer, without telling the TPA or anyone as far as known at this point, decided, a couple of months after adopting the document, that they didn't want to offer Roth after all. So they apparently did a corporate resolution to this effect, but didn't amend plan, nor did they inform participants.

Not known yet if the deferral election forms said Roth was permitted - haven't seen one yet.

Assuming the deferral election forms DID offer Roth, and no one elected Roth, then no worries, just amend the plan currently.

If the election forms did NOT offer Roth, how does one correct? I don't see any reasonable option other than to submit a VCP application with a retroactive amendment to conform the document to actual plan operation.

Any other thoughts? Anyone run into this before? Thanks.

[Peter Gulia]

Has either the employer or the plan's administrator evaluated whether the plan sponsor's resolution amended the plan?

What does the plan state about what the sponsor must or may do to amend the plan?

[Belgarath]

Has either the employer or the plan's administrator evaluated whether the plan sponsor's resolution amended the plan?

No. Let's assume, for the sake of the discussion at this point, that the plan's legal counsel determines that a corporate resolution does not constitute an amendment to a pre-approved Volume Submitter document in an Adoption Agreement format.



What does the plan state about what the sponsor must or may do to amend the plan?

Very little. It says that the employer shall have the right to amend the plan.

[Peter Gulia]

If the plan states a broad power to amend the plan without restricting the way the sponsor does it, almost any writing (perhaps even a series or set of e-mails) might be an amendment.

If the plan was not amended, I can't offer a suggestion about corrections because I haven't experienced the situation you describe.

[ETA Consulting LLC]

Has either the employer or the plan's administrator evaluated whether the plan sponsor's resolution amended the plan?

That was my initial thought. Did the resolution amend the plan until the plan could be formally amended. I've seen many of these.

Good Luck!

[Belgarath]

Thanks. But let's return again to the assumption, for purposes of this question, that there is no amendment. Let's say there isn't even a resolution - just an operational failure. Anyone have any other thoughts on the "correction?"

[IhrtERISA]

Belgaarath - I agree with your assessment. A VCP with a retroactive amendment would be appropriate. The only other option would be self-correction (SCP), which would only be permissible if the operational failure is deemed "insignificant."

In this situation, I would advise a client to go with VCP.