Correction of a plan document failure usually requires a plan amendment. The last IRS deadline for mandatory plan amendments was the end of the 1994 plan year. Since then, there has been a great deal of legislation requiring additional amendments. Unless the IRS extends its current deadline, amendments to comply with these new laws must be made by the end of plan year 2000. 12 Operational failures .
Operational failures occur when administrative procedures are in place but somehow go awry.
Operational failures usually include instances in which the actual operation of the plan differs from the plan document itself. Frequently this involves a failure to abide by the terms of the plan. For example, a plan document might include leased employees in its definition of eligible employees, whereas in practice the sponsor excludes leased employees from participation. Other examples of operational failures include actuarial miscalculations of lump sum amounts under a pension plan, incorrect interest calculations, errors in vesting and length of service determinations, failure to timely collect beneficiary designations and spousal consent forms, and the failure to distribute notices of the tax consequences of electing a certain form of distribution along with distribution notices. Although the plan documents may be in order, an operational error could disqualify the plan.