vcp question

client started a 401(k) in the same year they also had a SIMPLE IRA and also excluded employees  who were with a related employer (controlled group).  VCP says basically for the first issue you just file the vcp and ask the IRS to allow the contributions to stay in the plan.  However you also have to  deal with the people you excluded and make a corrective contribution.  Would IRS want you to make a corrective contribution for the improperly excluded employees to a plan the employer shouldn't have had?  

In the first case I believe the 401(k) does not have a problem but the SIMPLE IRA does. VCP can be used to ask that the SIMPLE IRA contributions remain in the IRA for years you had 2 plans.

In the 2nd case I'm not clear on what happened. Did the controlled group/related employer adopt the Plan? Does the Plan Document automatically pull in members of a controlled group whether of not they formally signed on to the plan? Would the plan pass coverage with the related employer properly excluded, that is if it did not sign on and the document doesn't automatically pull them in?

well its the same case.  there are two issues.   i am going to check the document. my understanding is the IRS SIMPLE document automatically includes controlled group members. is that wrong?