The expansion of the time period during which inadvertent errors in a tax qualified retirement plan under section 305 of Division T of the Consolidated Appropriations Act, 2023 provided welcome relief. Under the last iteration of the Employee Plans Compliance Resolution System (“EPCRS”) in Revenue Procedure 2021-30, plan sponsors were limited to self-correction of such errors within the correction period (sec. 9.02), which ended on the last day of the third plan year following the plan year in which the operational error occurred. The SECURE 2.0 Act eliminated the limit on the correction period.

The Internal Revenue Service confirmed that the correction period is no longer limited as provided in EPCRS and that inadvertent operational errors may be corrected, provided the error and the correction otherwise comply with the requirements of EPCRS, and the correction may be done for any year in which the error and the correction otherwise meet the EPCRS requirements as amended by SECURE 2.0. This is one of the changes that did not have a delayed effective date, and which could be immediately used by employers.

This expansion of EPCRS provides welcome relief to plan sponsors who discover operational errors in earlier years and want to correct the error without the need to file for approval of the correction with the Internal Revenue Service or to pay the fees for such filing. Plan sponsors desiring to use self-correction, as modified, should still consider the requirements of EPCRS and document the date the operational error was discovered, how it is corrected, and when it is corrected, so that the plan sponsor can demonstrate that the operational error was promptly corrected upon discovery and that steps to prevent the recurrence of the operational error have been implemented.

For additional information on the changes in SECURE 2.0 Act, please see A Timeline for SECURE 2.0 and Health Act Changes to Group Health and ERISA-Covered Retirement Plans.