Retroactive Amendment

I had a supervisor instruct one of our employees to prepare a plan amendment effective in 2024 to add a Roth Rollover source. Apparently a client's employee rolled money into their 401k plan back in 2024, but it was Roth. The plan didn't allow for Roth Rollovers. From my years if knowledge and recent research, I don't see how this would be allowed. The correction would be to remove the funds from the plan. Please provide some help and guidance. Thanks.

Under EPCRS, a plan sponsor may retroactively amend its plan document to allow for Roth source rollovers so as to "match" the plan's actual operation with the document. However, the retroactive amendment cannot otherwise be discriminatory under 1.401(a)(4). It's the 1.401(a)(4) issue that I would examine if the employee in question is an HCE.

@FORMER ESQ. is spot on. 

Providing the cite incase you need it. EPCRS Revenue Proc 2021-30
Part IV, Section 7.02(2)
(2) Corrective amendments for Operational Failures. Operational Failures may be corrected under SCP by adoption of a plan amendment that conforms the terms of the plan to the plan’s prior operations, provided the requirements of section 4.05(2) are satisfied.

4.05(2)
(2) Availability of correction by plan amendment in SCP. SCP is available for corrections made by plan amendment, as provided in section 4.05(2)(a), (b), and (c). In addition, a Plan Sponsor may adopt a plan amendment to reflect corrective action. For example, if the plan failed to satisfy the ADP test required under § 401(k)(3) and the Plan Sponsor must make qualified nonelective contributions not already provided for under the plan, the plan may be amended to provide for qualified nonelective contributions.

4.05 goes on into more detail about the requirements, so I suggest reading it in full, along with the other parts of the Rev Proc that it mentions.