So how do I fix a plan amendment failure?

Let’s say that you discover that your ESOP is missing one of the amendments that I mentioned in yesterday’s post. Now what? This is where that IRS voluntary correction program comes in. And the good news is that the IRS realizes that these failures do occur. In fact, the following is from their website:

“One of the most common qualification failures currently resolved under the Voluntary Correction Program (VCP) is the nonamender failure occurring in individually designed plans. The term “nonamender failure” includes a failure to adopt timely required good faith plan amendments under the Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. 107-16 (EGTRRA good faith amendments), interim, and certain other plan amendments.”

The correction is pretty easy if the failure relates to an EGTRRA good faith, interim or optional amendment. The IRS has a streamlined application for these types of failures.

On the other hand, if the failure relates to the GUST restatement due back in 2002 or a failure to amend within your designated Cycle (see yesterday’s post), the process is more involved.

Still the best course of action if you find that your ESOP has not had one of the necessary amendments is to get the problem fixed by using the IRS’s voluntary correction program as soon as possible.