QMAC/QNEC option for Incorrect ER Match; Failed Testing (VCP & VFCP)

[IhrtERISA]

Greetings,

I am in the process of preparing a VCP for the below described errors. Where I'm at a loss (despite extensive review of the forums) is

(a) Can the correction for the use of the incorrect match be limited to just those participants making deferral (those with "account balances") by using a QMAC instead of a QNEC correction; and

(b) If a prohibited transaction occurred as a result of the incorrect match % and the loss earnings, thus requiring a VFCP.

FAILURES:

1. Failure to correctly apply the Plan's matching contribution provisions to employees during 2012 and 2013 (Plan Sponsor applied lower matching % to all new employees, despite the Plan language limiting this to only acquired Company A employees)

2. Corrections necessary to pass the non-discrimination tests for 2013 and 2014 due to the three tier matching contribution formula (Plan Sponsor used the wrong matching % in performing tests)

Proposed Correction under VCP

A. For those participants that received the smaller incorrect match AND that had "account balances" (i.e., limiting the correction only to those participants making elective deferrals). a QMAC (as opposed to a QNEC) could be made under VCP. [i know there's a strong argument this correction should go to all eligible participants - even those not deferring - but such a correction would be astronomically higher]

B. Since the incorrect employer match was used, resulting in lost earnings, I believe this would be a prohibited transaction (outstanding match % became plan assets when PS filed tax return) and thus I would propose a VFCP be filed with the DOL (meaning no filing of Form 5330 Return of Excise Taxes). However, looking at the VFCP Application, there is no box to check for "missed employer matching contributions/earnings"

Any insight would be most appreciated. Thank you...

[Tom Poje]

I apologize, after reading the question a couple of times I still don't even understand it.

are you saying some people were provided a smaller match than what they should have received?

are you saying some people shouldn't have received a match at all and therefore that causes a plan failure that wasn't there originally?

as a side note, EPCRS provides 'acceptable' solutions, but that doesn't mean there aren't others. I haven't done any under VCP, but I thought the issue was you suggest a possible correction and proceed from there.