Walk In CAP Issue Retroactive amendment v. operational failure

[Guest PALAWYER]

In the past three months, I have been asked to assist three separate clients with the same plan error:

Each client sponsors a qualified plan and is a member of a controlled group of corporations. The plan documents each allow "Employees" to participate in the plan after satisfying the age and service requirements. An "Employee" is defined as any employee of the "Employer." "Employer" is defined as the plan sponsor and any member of a controlled group, Affiliated service group, etc. The sponsor, however, has only allowed its own employees to participate and not employees of other members in the control group. I plan to use Walk-IN CAP to seek a retroactive amendment to conform the plan with prior practice. Treating this as an operational failure will get very expensive! Each client is a small company owned by a large parent

Help- Agree or Disagree? Suggestions?

[Guest xplan]

It seems as is you can use the Voluntary correction with Service approval (VCP). As long as you can show in the application that the plan meets the coverage requirements (as well as other qualification requirements), I don't see a problem doing a retroactive amendment to bring the plan in compliance with its prior operation. If however, the plans cannot meet coverage (because keep in mind that even though the employees of other controlled group member may be treated as excluded, they are still shown as nonexcludable ee's not benefiting, if they would have met the plan's eligibility requirements) on their own, then you have an operational issue.

You may want to look at Rev Proc 2000-17 before you proceed.