Is the Self-Correction Program (SCP) available to correct demographic failures?

• A. Yes, it can correct all types of failures
• B. No, it is not available for demographic failures
• C. Yes, but only under special circumstances
• D. No, demographic failures must go through a different process

Answer: (B)

The Self-Correction Program (SCP) is designed to allow plan sponsors to correct certain types of operational failures without the need for formal submission to the IRS. However, it has limitations regarding the types of failures that can be corrected.

Demographic failures, which typically involve issues related to the eligibility of employees or improper classification of employees (e.g., not meeting participation requirements), fall outside the scope of what can be corrected under the SCP. These types of failures usually require a more comprehensive correction process, such as plan amendments or submitting the plan under the Voluntary Correction Program (VCP), which is more suited to handle demographic-related issues.

By stating that SCP is not available for demographic failures, it aligns with the established guidelines that clearly delineate what types of operational failures can be corrected through SCP and ensures compliance with regulatory requirements. This differentiation helps manage the integrity of retirement plans while providing a clear framework for correction.