Employer sponsors a SARSEP. Employer called us recently concerned about several potential issues with their plan. I just want to make sure that I have a firm grasp of possibe repercussions of the potential errors:

1. Document has not been updated since 1993. I think we can correct using VCP.

2. Potentially less than 50% of the employees participated in a given year. If that occurred the employer ceased to be an eligible sponsor. Is the IRS just going to allow the plan sponsor to cease contributions at this point? It seems like that from reviewing Rev. Proc. 2008-50.

3. Potentially the plan could have failed the deferral percentage test in any number of years. Under VCP employer should be able to correct in any such error by making nonelective contributions for any such and adjusting for earnings.

4. Potentially employees may not have been provided with an opportunity to participate. Under VCP this requires nonelective contributions adjusted for earnings.

5. Potentially excess contributions (elective deferrals) could have been made. Under VCP this requires refunds adjusted for earnings.

Am I grasping this correctly; particularly point #2?

Thanks in advance for any guidance.