Further to my blog of yesterday, the IRS had previously indicated, in Employee Plans News (2/11/11), that an eligibility failure of a 403(b) plan may be corrected under the Voluntary Correction Program (“VCP”). Here is what the IRS said:
If a retirement plan was intended to satisfy the requirements of Code §403(b) but was adopted or operated by a plan sponsor that is not, or has ceased to be, a tax-exempt organization described in Code §501(c)(3) or an educational organization described in Code §170(b)(1)(A)(ii), the plan may have an “eligibility failure”. The failure can, however, be corrected under the VCP, as indicated in Revenue Procedure 2008-50.
To correct the failure, the plan sponsor must complete all parts of Appendix F, Streamlined VCP Submission, and Schedule 6, Employer Eligibility Failure (401(k) and 403(b) Plans only). For example, the sponsor must provide:
• the plan name, Employer Identification Number, and plan number information on each page of the submission;
• the year in which the sponsor ceased being eligible to adopt or operate a Code §403(b) plan; and • a description of the proposed method of correction.
The plan sponsor must also include the correct amount of fees as indicated in the Appendix F instructions with the submission.