Plan Document Problems and Correction by Reformation (Posted August 8, 2004) Technical Tip 126: The following question and answer were from the IRS Q&A Session at the 2003 ASPPA Annual Conference: Recently one of the 401(k) plans that we recordkeep for was audited by an independent CPA firm. It was discovered that the Plan’s matching formula was increased, in operation, over 5 years ago. However, there is no amendment of record for this increase. The client does have minutes of board meetings and internal memos referring to the increase. It was also discovered that the client had been withholding the participant’s elected percentage of the value of fringe benefits during this time, although the document does not exclude fringe benefits. It is our thought that we can self-correct under EPCRS for these failures because these were Insignificant Operational Failures in the aggregate due to the fact that it was the intention of the employer to increase the match proven by the internal records and there was no harm to NHCE’s as it was an increase in benefit; thus, no "makeup" contribution would be due. A retroactive amendment would be the only "fix" necessary. The value of fringe benefits excluded from withholding involved a very small fraction of the employees (less than 2%). A make-up contribution, including earnings, would be made for these employees for all years involved. Can you advise to whether this assumptions is correct? Response: Unfortunately, the facts provided are insufficient to determine whether this is a significant defect. In any case, a reformation amendment of the type suggested by the questioner would not be available as a self-correction technique in the circumstances described. It is possible that such an amendment might be permitted under VCP. See Rev. Proc. 2003-44. View all Tips © 2012 Reish Luftman Reicher & Cohen, a Professional Corporation Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation.