Determination of Two Year Correction Period Under APRSC for Errors Occ

[Guest DMK]

If a significant operational failure occurs in several consecutive plan years, is there a separate two year correction period under APRSC for each plan year or should the failures be corrected by the end of the second plan year after the first plan year for which the failure occurred?

[Guest Mr. X]

I hope you meant to say "insignificant" because significant operational failures cannot be corrected via APRSC. But, the fact that an error occurred for several consecutive plan years in of itself suggests significance in the failure.

Having said that, each year has a separate correction period.

[Guest]

I hate to disagree, but . . . .

Rev. Proc. 2000-16, Section 9, covers self-correction of significant operational failures under APRSC, and provides that the correction must be completed or substantially completed by the last day of the second plan year following the plan year in which the failure occurred. There is no similar time limit for correction of insignificant failures under APRSC.

As to whether there is a separate two-year correction period for each consecutive plan year in which the same operational failure occurs, I think the technical answer is probably that there is. However, if a plan has an operational failure for several consecutive years, and corrects under APRSC for only the last two years, it will either have to let the other years go uncorrected or use VCR to correct the other years. I'd be very uncomfortable advising a client to let other years go uncorrected, and I suspect that if the plan went in under VCR for the other years, the IRS would question the propriety of APRSC for the last two years and use a magnifying glass on the submission.

[Guest Mr. X]

Well I can tell my wife I learned something new today. I need to stop living in the past. By the way, 33fan, I hope you are not referring to Kareem Abdul Ja-beer or Orenthal.