Many moons ago, I got a call from a bank with a problem. For two decades—yes, twenty years—they had failed to include bonuses as part of plan compensation. The kicker? They were supposed to. This wasn’t a gray area; the plan document was crystal clear. I gave them the only legitimate answer: file under the IRS Voluntary Compliance Program (VCP). It wasn’t fun, but it was the right play.
But instead of taking that advice, the bank went shopping and found an ERISA attorney who told them they could just self-correct. Self-correct? For 20 years of errors and who-knows-how-many participants? That’s not self-correction—that’s magical thinking. Sure, they could try to self-correct. And G-d help them if an IRS agent ever knocks on the door.
There are plenty of plan providers and attorneys who pride themselves on being aggressive for their clients. They push the envelope, bend the rules, and tell clients exactly what they want to hear. But there’s a difference between being aggressive and being reckless. Fly too close to the sun and you might not just get burned—you might take your client down with you. And the IRS or DOL? They don’t exactly hand out sunscreen.
