Our philosophy for coverage and nondiscrimination testing has always been “everything passes, some plans just take a little longer to prove it”.
That was put to the test recently for one of our law firm clients: an unusually young new partner was causing their §401(a)(4) nondiscrimination test to fail. We emptied the whole toolbox on it, but nothing worked. Thought we were out of luck. Adding an extra contribution for all NHCE’s was going to be very expensive.
Ah, but wait! The IRS came to the rescue with the §1.401(a)(4)-11(g) corrective amendment rules. Within 9½ months after year end, we can amend the plan to give an extra allocation to a carefully selected group. Problem solved, at very low cost.
Note that the amendment must have “substance”, i.e. provide real benefits for real people. One that doesn’t is described in Suzanne Wynn’s blog here. Nice try, creep…
There’s more detail in the regulations. Go to paragraph (g) for corrective amendments.