ROBS Compliance Case Studies

Date and signal: Plan year 2025. An April 15, 2026 census shows Mira, a full-time shop lead hired March 1, 2024, was excluded after satisfying one year of service and the July 1, 2025 entry date.

Documents: Adoption agreement, eligibility section, payroll census, W-2 wages, deferral notices, enrollment emails, coverage test file and TPA notes.

Calculation: Invented assumptions: Mira earned $48,000 from July 1 through December 31, 2025; actual deferral percentage for similarly situated non-highly compensated employees was 4%; nonelective allocation was 3%. Missed deferral screen: $48,000 × 4% × 50% = $960. Missed employer contribution screen: $48,000 × 3% = $1,440. Total before earnings: $960 + $1,440 = $2,400.

Facts that change the result: The result changes if Mira did not meet hours, the plan used a different entry date, auto-enrollment safe harbor applies, compensation is defined differently, or a VCP submission is safer than self-correction.

Agency and correction boundary: Potential qualification and operational failure first; fiduciary and notice issues may exist, but EPCRS analysis does not decide them.

First safe action: Stop any narrative that she was never eligible, preserve original census exports, have the TPA and ERISA counsel classify the failure, then calculate earnings and participant allocation.

Unresolved decision: Whether SCP, VCP or Audit CAP is available remains unresolved until timing, practices and examination status are confirmed.^{[S1][S2][S3][S12]}

Date and signal: Initial purchase on May 20, 2024; annual value reported July 29, 2025. The plan bought 20,000 shares for $240,000, but the file contains only a founder spreadsheet and no valuation-date support for revenue, debt, market approach, capitalization table or assumptions.

Documents: Stock subscription, stock ledger, trust statement, bank wire, board minutes, appraisal scope, financial statements, tax returns and Form 5500 asset values.

Calculation: Invented assumptions: independent reconstruction screens transaction-date fair value at $10.50 per share rather than $12.00. Overvaluation screen: ($12.00 - $10.50) × 20,000 shares = $30,000. Potential share restoration screen at $10.50: $30,000 ÷ $10.50 = 2,857.14 shares, rounded only if counsel and corporate documents support a share adjustment.

Facts that change the result: The result changes if a contemporaneous independent appraisal exists, new debt closed after the valuation date, preferred rights dilute common shares, the plan bought qualifying employer securities for adequate consideration, or later losses explain the annual value.

Agency and correction boundary: Valuation is evidence for qualification, fiduciary prudence, adequate consideration, Form 5500 reporting and possible prohibited-transaction screens; it is not a single outcome.

First safe action: Freeze redemptions or new stock transfers, preserve original valuation files, engage an independent valuation professional, and separate transaction-date valuation from annual reporting estimates.

Unresolved decision: No liability is declared until ERISA counsel, tax counsel and valuation professionals determine the relevant standard and correction method.^{[S1][S2][S4][S5][S6][S7][S11]}

Date and signal: Lease began February 1, 2025; discovered November 18, 2025. The C corporation paid the founder's separate LLC $3,000 per month for storage space while the plan held 92% of the corporation stock and no independent lease review appears in the file.

Documents: Lease, property ownership records, rent comps, board minutes, conflict disclosures, bank statements, corporate invoices, plan fiduciary minutes and appraisal support.

Calculation: Invented assumptions: supported market rent is $2,200 per month for 9 months and the founder's LLC had $600 of avoided utilities paid by the corporation. Excess rent: ($3,000 - $2,200) × 9 = $7,200. Use-value/profit comparison: $7,200 excess rent versus $600 avoided utilities; screen restoration at the greater supported benefit before earnings, $7,200, so the same benefit is not double counted as $7,800 without support.

Facts that change the result: The result changes if the lease predates the plan, rent was independently approved at fair market value, the property owner is not a disqualified person or party in interest, or an exemption applies.

Agency and correction boundary: Potential prohibited-transaction and fiduciary lane first; Form 5330, VFCP and corporate tax treatment are separate follow-on screens.

First safe action: Stop new related-party rent changes, preserve the original lease rather than backdating minutes, obtain ERISA counsel and independent rent support, then calculate restoration and tax filings only after classification.

Unresolved decision: Whether the transaction is exempt, correctable through VFCP, subject to section 4975 tax, or requires a different remedy is unresolved.^{[S4][S5][S6][S8][S9][S12]}

Date and signal: Payroll dates September 13 and September 27, 2026; trust deposit October 18, 2026. Participant deferrals and loan repayments were withheld from payroll but stayed in the corporate account after a payroll vendor transition.

Documents: Payroll registers, trust deposit confirmations, loan amortization records, bank statements, payroll-vendor ticket, remittance policy and participant allocation report.

Calculation: Invented assumptions: $8,400 participant deferrals and $1,600 loan repayments were 21 days late; VFCP calculator input uses $10,000 principal, 21 days, and a supported 5% annual lost-earnings rate for a reproducible screen. Lost earnings: $10,000 × 5% × 21 ÷ 365 = $28.77.

Facts that change the result: The result changes if the amounts could reasonably have been segregated earlier, payroll frequency differs, the plan uses a different earnings method, deposits were partly timely, or DOL self-correction conditions are not satisfied.

Agency and correction boundary: DOL fiduciary correction and VFCP or self-correction lane first; EPCRS may matter for loan failures, and payroll or Form 5500 reporting may need separate review.

First safe action: Deposit principal immediately, calculate lost earnings, allocate by participant, preserve payroll evidence, and avoid rewriting deposit dates to make the file look timely.

Unresolved decision: Whether VFCP self-correction, a full VFCP application, EPCRS loan correction or additional reporting is appropriate remains open.^{[S3][S7][S9][S12]}

Date and signal: 2023 and 2024 plan years identified on August 4, 2026. The sponsor believed the owner-only filing exception applied because only the founder deferred, but the ROBS plan owned employer stock and had eligible employees with balances by late 2024.

Documents: Prior Form 5500 searches, plan number, EINs, trust statements, participant count, fidelity bond, stock value support, Schedule I or H inputs, Form 1120 tie-out and provider termination file.

Calculation: Invented assumptions: small-plan DFVCP screen for two late annual reports, each more than 150 days late. Basic daily amount would exceed cap: $10 × 150 days × 2 filings = $3,000. Small-plan DFVCP per-plan cap screen: $1,500, so the payment screen is $1,500 before any IRS or other agency issue.

Facts that change the result: The result changes if the plan is large, a notice of intent to assess has arrived, the filing is amended rather than delinquent, Form 5500-EZ applies, or IRS late-filer relief must be coordinated separately.

Agency and correction boundary: DFVCP is a DOL annual-reporting lane; it does not resolve inaccurate asset values, missing audits, qualification failures, IRS penalties or fiduciary record gaps.

First safe action: Reconstruct records before filing, file complete delinquent returns through EFAST2 if eligible, pay through DFVCP, and document every assumption used for participant count and stock value.

Unresolved decision: Whether amended filings, accountant review, independent audit schedules or IRS relief are needed remains unresolved until records are reconciled.^{[S1][S7][S10][S12]}