Glossary of Special EPCRS Terms
Demographic error: Failure to meet nondiscrimination, minimum participation, or coverage rules, which requires a substantive corrective amendment
to add more benefits or increase existing benefits.
Employer eligibility error: Either:
(1) The adoption of a 401(k) plan by any ineligible employer; or
(2) In the case of a TSA plan, any of the following types of errors:
•
The use of a nontransferable contract in cases where the contract or certificate issued is owned by a person other than the tax-exempt trust.
•
Failure to establish or maintain a custodial account where distributions can only be made upon the employee’s death, disability, separation from
service, attainment of age 59 1/2, or upon incurring a financial hardship (applies to salary deferrals only). In addition, all contributions are invested
in regulated investment company stock and held in that custodial account.
•
Failure to purchase either an annuity contract from an insurance company or a custodial account from a regulated investment company utilizing
a bank or an approved non-bank trustee/custodian.
•
A plan of an ineligible employer.
Excess amount: In the case of a qualified pension, profit-sharing or stock bonus plan, any of the following:
•
•
•
•
•
•
An Overpayment,
An elective deferral or after-tax contribution returned to satisfy the annual additions limit,
An elective deferral distributed to satisfy the 402(g) limit,
An ADP or ACP excess,
Elective deferrals distributed to meet the $200,000 (as indexed) compensation limit, or
Any similar amount required to be distributed to maintain plan qualification.
In the case of a TSA plan, any contributions that exceed the annual additions limit for the year (and for years prior to January 1, 2002 ) or the maximum
exclusion allowance for the year.
Favorable determination letter: A current favorable determination letter for an individually-designed qualified plan or a volume submitter qualified
plan. A current favorable opinion letter for a prototype qualified plan. The determination or opinion letter is “current” if:
(1) It covers GUST (an acronym for GATT, USERRA, SBJPA ‘96, TRA ‘97, RRA ‘98 and CRA); or
(2) It covers GUST, excluding CRA, and the plan sponsor has amended the plan to comply with CRA by the later of the end of the first plan year beginning
on or after January 1, 2002, the plan’s GUST amendment deadline, or June 30, 2003; or
(3) It either covers the provisions of the Tax Reform Act of 1986 (TRA ’86) or was initially effective after December 7, 1994, and by the later of
February 28, 2002, or the last day of the first plan year beginning on or after January 1, 2001, the plan sponsor either submitted a GUST determination letter
application or certified it would adopt a prototype or volume submitter plan that had been submitted to the IRS by December 31, 2000, and adopts its plan
by September 30, 2003; or
(4) It either covers the provisions of TRA ‘86 or was effective after December 7, 1994, and the plan was directly affected by the September 11, 2001 terrorist
attack, and the plan sponsor submitted a GUST determination letter application by June 30, 2002; or
(5) It was timely amended for TRA ‘86, UCA, and OBRA ‘93, and the plan sponsor submitted a GUST determination letter application by September 3, 2002, or
(6) The plan is first adopted or effective after February 28, 2002, and the plan sponsor makes a timely request for an initial letter or timely adopts an approved
prototype or volume submitter plan; or
(7) The plan terminated and was amended to add the provisions of GUST before its GUST amendment deadline.
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Glossary of Special EPCRS Terms
Ineligible employer: An employer that is not able to sponsor a TSA plan because that employer is not a tax-exempt organization described in Internal
Revenue Code section 501(c)(3) or a public educational organization described in Internal Revenue Code section 170(b)(1)(A)(ii).
Operational error: Either:
(1) Failure to administer a qualified pension, profit-sharing or stock bonus plan in accordance with the terms of the plan document; or
(2) In the case of a TSA plan, any failure to satisfy the requirements of Internal Revenue Code section 403(b), which is not a demographic or employer
eligibility error.
Overpayment: Any payment to an employee or beneficiary from a qualified plan in an amount greater than what he should have received, including
a payment because of:
•
An error in applying the compensation limit ($200,000, as indexed), other than a return of elective deferrals to satisfy this limit;
•
An error with respect to forfeited nonvested matching contributions that are ACP excesses;
•
An error with respect to matching contributions made on deferrals distributed as ADP excesses;
•
Failure to comply with the plan’s terms regarding the annual additions limit (other than a return of elective deferrals or after-tax contributions to
satisfy this limit).
Plan document error: A provision (or lack of a provision) in a qualified plan document that violates qualification rules and cannot be corrected under
section 401(b) or other statutory provisions. A failure to timely and properly amend a plan by the applicable amendment deadline is considered to be a plan
document error even if the plan is operated as though the amendments had been timely and properly adopted.
Significant error vs. Insignificant error for SCP: Must consider the following factors: (1) whether other errors occurred during the same period; (2) the
percentage of plan assets and contributions involved in the error; (3) the number of years the error occurred; (4) the number of participants affected relative to
the total number of plan participants; (5) the number of participants affected relative to the number of participants who could have been affected; (6) whether
the correction was made within a reasonable time after discovering the error; and (7) the reason for the error.
Substantially-completed corrections: Under SCP, either (1) the plan sponsor is reasonably prompt in identifying the error and beginning corrective
actions and the corrections are completed within 90 days after the end of the two-year correction period; or (2) the plan sponsor completes the corrections
for 85% of all affected participants during the two-year correction period and the remaining corrections are completed in a timely manner.
Transferred assets: Qualified plan assets transferred (including a merger or consolidation of plan assets) in connection with a corporate merger, acquisition,
or other similar employer transaction, from a plan sponsored by an employer that was not a member of the same controlled group as
the plan sponsor prior to the corporate merger, acquisition, or other similar employer transaction. If a transfer of plan assets is accomplished through several
transfers, then the date of the transfer for purposes of the correction programs is the date of the first transfer.
Under audit: The plan’s Form 5500 series submission is being audited by the IRS Employee Plans division or the plan sponsor’s Form 990 series submission
is being audited by the IRS Exempt Organization division. A plan is considered to be under audit if the plan sponsor has received notification of an impending
audit or a referral for audit. A plan is also considered to be under audit if a plan sponsor who has applied for a determination letter or plan termination
determination is notified by the IRS agent of possible qualification failures or a need for additional information. For additional information regarding
aggregated plans, see section 5.03 of IRS Revenue Procedure 2003-44.
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