The law of employee benefits is quite complex and errors in documentation or operation can have dire tax consequences for employers, fiduciaries, and participants. Yet, due to the complexity, errors can and do happen. Errors often occur from not understanding the income and FICA tax withholding and reporting of the particular plan, misclassifying workers, not understanding plan documents, late deposits, adopting a plan that the employer is not eligible to adopt, failing to timely amend plan documents for new developments and receiving bad advice.
When errors are discovered, if they are not promptly corrected in the proper manner, the consequences can escalate. We have the experience to recognize document or operational defects and to advise on the most practical and effective correction method, whether it be through a formal governmental program or otherwise. Formal correction programs include the IRS Employee Plans Compliance Resolution System, 409A Operational Correction Program, 409A Document Correction Program, the Department of Labor’s Fiduciary Voluntary Correction Program. Other methods for correcting errors can include IRS closing agreements, IRS private letter rulings, and correcting income tax and FICA tax withholding and returns.