The sponsor of an 8 partticipant (small employer) 401k plan ....signed, dated, and mailed its Heart Amendment forms to the Prototype plan vendor a few days late (after 12/31/10). Now the Prototype vendor is all upset and has the sponsor scared to death ...claiming that there are adverse tax consequences that may result. The Prototype vendor has also told the sponsor that that the Prototpe vendor can no longer issue the plan a customized summary plan description nor include the plan in future required amendments, because of the few days delay in signing the Heart forms.

Is there a cheap way to fix things? Or ... is there "any" way to fix things ?

Is it really the end of the world (as bad as the Prototype vendor makes it sound ?).

Is there some kind of "second chance" IRS/DOL program that the sponor can apply to for self-correction?

What would you suggest?

Thanks

The document sponsor is right that late amendments can have adverse tax consequenes (e.g., plan disqualification). However, the employer should be able to fix this with a simple Voluntary Correction Program (VCP) submission to the IRS under Revenue Procedure 2008-50. (See http://www.irs.gov/retirement/article/0,,id=96907,00.html)

VCP, filed with the IRS. It's an interim amendment, I believe, so the user fee is just $375. Slam dunk, easty fill-in forms available.

Ignore it, and it does become a big deal on audit--and, without the correction, the plan loses its tax-qualified status.

Before you go with VCP, I would find out if the document provider adopted the HEART amendment on behalf of all adopting employers. If they didn't, I would ask why. If they did, the employer would only have needed to sign the amendment if they were selecting something other than a default option. That would make their amendment timely, just possibly not with the exact provisions they wanted.

Our document provider's HEART amendment has the following at the end: