PART I. IDENTIFICATION OF FAILURE(S) AND CORRECTION METHODS
Internal Revenue Bulletin 2008-35 · 2026-10-03 edition · updated 2026-10-04 · United States
The following failure(s) occurred with respect to the SIMPLE IRA Plan identified above: (Check failure(s) that apply. Within each failure, check applicable boxes, and provide the information requested.)
□ A. Employer Eligibility Failure □ The plan was adopted by a Plan Sponsor who was (or…¶
Plan under the requirements of § 408(p) because the Plan Sponsor (and, if applicable, its related controlled group or affiliated service group employers) had more than 100 employees (including leased employees, if applicable) who earned $5,000 or more in compensation during the following plan year(s):
□ The plan was adopted by a Plan Sponsor who was not eligible to sponsor a SIMPLE IRA…¶
of § 408(p) because the Plan Sponsor established or maintained a Qualified Plan with respect to which contributions were made (or under which benefits were accrued) during any plan year of the SIMPLE IRA Plan. The failure occurred during the following plan year(s):
Description of the Proposed Method of Correction
All contributions to the plan ceased as of (insert a date no later than the date this application is filed under VCP). The Plan Sponsor will not permit any new employer or salary reduction contributions to be made to the plan.
□ B. Failure to Make Required Employer Contributions¶
The Plan Sponsor failed to make employer contributions on behalf of eligible employees as required under the terms of the plan.
□ The failure occurred on account of the erroneous exclusion of eligible employees □…¶
The failure occurred for the following plan years:
For the applicable plan years, the provisions of the plan document required the Plan Sponsor to make employer contributions based on the following formula:
□ 2% nonelective contribution on behalf of each eligible employee who earned at least…¶
□ Matching contribution on behalf of each eligible employee equal to deferrals up to 3%…¶
deferrals up to ____% of compensation.
(Note: If the failure occurred for multiple plan years and different employer contribution criteria applied during those years, check the applicable box, and indicate the plan years for which the formula applied).
2008–35 I.R.B. 542 September 2, 2008
Description of the Proposed Method of Correction
The Plan Sponsor has contributed (or will contribute) additional amounts to the plan on behalf of each affected employee. For each affected employee, the corrective contribution will be determined by calculating the contribution the employee would have been entitled to receive under the terms of the plan and subtracting any contributions already made on behalf of the employee for the plan year. The corrective contribution made on behalf of an affected employee will be adjusted for earnings. Earnings will be calculated from the last day of the plan year for which the failure occurred through the date of the corrective contribution. The corrective contribution (adjusted for earnings) will be made to each affected employee’s SIMPLE IRA account. If an affected employee does not have a SIMPLE IRA account, an account will be established for that employee.
If the plan did not provide eligible employees with the opportunity to make elective deferrals and the plan provides for matching contributions, the corrective matching contribution will be based on the assumption that the eligible employee would have made an elective deferral equal to 3% of compensation.
The total corrective contribution (before adjusting for earnings) for each plan year is:
The earnings calculation for an affected employee will be based on one of the following method(s) (check one):
□ Actual investment results of the affected employee’s SIMPLE IRA account. □ The…¶
(“VFCP Online Calculator”) ( http://www.dol.gov/ebsa/calculator/main.html ), since the actual earnings of the affected employee’s IRA account cannot be ascertained.
□ Actual investment results for years in which data is available, or the rate…¶
for years in which the actual earnings of the affected employee’s IRA account cannot be ascertained. The VFCP Online Calculator was or will be used for the following years:
Former employees affected by the failure (check one):
□ There are no former employees affected by the failure. □ Affected former employees…¶
accounts. To the extent that an affected former employee cannot be located following a mailing to the employee’s last known address, the Plan Sponsor will take reasonable actions to locate that employee. Such actions include the use of the Internal Revenue Service Letter Forwarding Program (see Rev. Proc. 94–22, 1994–1 C.B. 608) or the Social Security Administration Employer Reporting Service. After such actions are taken, if an affected employee is not found but is subsequently located on a later date, the Plan Sponsor will make corrective contributions to the affected employee’s SIMPLE IRA account at that time.
□ C. Failure to provide eligible employees with the opportunity to make elective deferrals¶
The plan did not provide employee(s) who satisfied the applicable eligibility requirements with the opportunity to make elective deferrals to the SIMPLE IRA plan. The failure occurred for the following plan years:
September 2, 2008 543 2008–35 I.R.B.
Description of the Proposed Method of Correction
The Plan Sponsor has contributed (or will contribute) additional amounts to the plan on behalf of each affected employee. The corrective contribution will be made to compensate the affected employee(s) for the missed deferral opportunity. The corrective contribution on behalf of each affected employee is equal to 50% of what the employee’s deferral might have been had he or she been provided with the opportunity to make elective deferrals to the plan. Since the employee’s deferral decision is not known, the deferral amount is estimated by assuming that the excluded employee would have made an elective deferral equal to 3% of his or her compensation. (Example: N, a nonhighly compensated employee was erroneously excluded from the plan. During the year of exclusion, N made $10,000 in compensation. N’s missed deferral is estimated to be: 3% times $10,000 or $300. The required corrective contribution on behalf of N, before adjusting for earnings, is 50% of $300 or $150). Thus, the required corrective contribution for an employee who was erroneously excluded from making elective deferrals from a SIMPLE IRA Plan is equal to 1.5% of compensation (adjusted for earnings).
The total corrective contribution (before adjusting for earnings) on behalf of the affected employees for each plan year is as follows:
The corrective contribution made on behalf of each affected employee will also be adjusted for earnings. Earnings will be calculated from the date(s) that the contribution(s) should have been made through the date of the corrective contribution. The corrective contribution (adjusted for earnings) will be made to each affected employee’s SIMPLE IRA account. If an affected employee does not have a SIMPLE IRA account, a SIMPLE IRA account will be established for that employee. Earnings will be calculated on the basis of one of the following methods (check one):
□ Actual investment results of the affected employee’s SIMPLE IRA account. □ The…¶
□ Actual investment results for years in which data is available, or the rate…¶
for years in which the actual earnings of the affected employee’s IRA account cannot be ascertained. The VFCP Online Calculator was or will be used for the following years:
Former employees affected by the failure (check one):
□ There are no former employees affected by the failure. □ Affected former employees…¶
accounts. To the extent that an affected former employee cannot be located following a mailing to the employee’s last known address, the Plan Sponsor will take reasonable actions to locate that employee. Such actions include the use of the Internal Revenue Service Letter Forwarding Program (see Rev. Proc. 94–22, 1994–1 C.B. 608) or the Social Security Administration Employer Reporting Service. After such actions are taken, if an affected employee is not found but is subsequently located on a later date, the Plan Sponsor will make a corrective contribution to the affected employee’s SIMPLE IRA account at that time.
□ D. Excess Amounts Contributed¶
The Plan Sponsor contributed Excess Amounts to the plan on behalf of participants as follows: (check boxes that apply)
□ Amounts were contributed in excess of the benefit the participants were entitled to…¶
( e.g., the applicable limit under § 408(p)(2)(E)).
2008–35 I.R.B. 544 September 2, 2008
The total of the Excess Amounts for each affected plan year was as follows:
Description of the Proposed Method of Correction (check all correction methods that apply)
□ Distribution of Excess Elective Deferrals¶
The Plan Sponsor has effected (or will effect) a distribution of the Excess Amounts, adjusted for earnings through the date of correction, to the affected participant(s). The earnings adjustment will be based on the actual rates of return of the participant’s SARSEP IRA account from the date(s) that the excess deferrals were made through the date of correction.
Affected participants were (or will be) informed that the distribution of an Excess Amount is not eligible for favorable tax treatment accorded to distributions from a SIMPLE IRA and, specifically, is not eligible for tax-free rollover.
The total corrective distribution (before adjusting for earnings) for each affected plan year is as follows:
□ Distribution of Excess Employer Contributions¶
The Plan Sponsor has effected (or will effect) the return of excess employer contributions, adjusted for earnings through the date of correction, to the Plan Sponsor. The earnings adjustment will be based on the actual rates of return on the affected participants’ SIMPLE IRA accounts from the date(s) that the excess employer contributions were made through the date of correction. The amount returned to the Plan Sponsor is not includible in the gross income of the affected participant(s). The Plan Sponsor is not entitled to a deduction for such excess employer contributions. The amount returned is reported on Form 1099–R as a distribution issued to the affected participant(s), indicating the taxable amount as zero.
September 2, 2008 545 2008–35 I.R.B.
The return of the excess employer contributions (before adjusting for earnings) for each affected plan year is as follows:
□ Retention of Excess Amounts¶
Note: If this correction method is selected, an additional VCP fee is required. (See section 12.05(2) of Rev. Proc. 2008–50.)
□ The Excess Amounts (including earnings) were retained in the SIMPLE IRA accounts of…¶
as follows.
The earnings adjustment will be based on the actual rates of return of the SEP or SARSEP from the date(s) that the excess employer contributions were made through the date of correction.
□ Excess Amounts of $100 or less (See section 6.02(5)(e) of Rev. Proc. 2008–50.)¶
For one or more participants, the total Excess Amount (employer contributions and/or elective deferrals before adjusting for earnings) is $100 or less. The Excess Amount will not be distributed.
Former employees affected by the Excess Amounts failure (check one):
□ There are no former employees affected by the failure. □ Affected former employees…¶
accounts. To the extent that an affected former employee cannot be located following a mailing to the employee’s last known address, the Plan Sponsor will take reasonable actions to locate that employee. Such actions include the use of the Internal Revenue Service Letter Forwarding Program (see Rev. Proc. 94–22, 1994–1 C.B. 608) or the Social Security Administration Employer Reporting Service. After such actions are taken, if an affected employee is not found but is subsequently located on a later date, the Plan Sponsor will make corrective contributions to the affected employee’s SIMPLE IRA account at that time.
2008–35 I.R.B. 546 September 2, 2008
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