Legal Alert: IRS Clarifies When Plan Amendments May be Used to Correct Operational Failures


The Internal Revenue Service (IRS) recently explained when a plan amendment can be used to correct a failure to follow plan terms in the operation of a retirement plan. (See Retirement News for Employers, Winter 2008). The Employee Plans Compliance Resolution System (EPCRS) is a voluntary correction program that allows plan sponsors to correct plan mistakes that, if left uncorrected, could result in a retirement plan losing its favorable tax treatment. The EPCRS includes a Self Correction Program (SCP), under which a correction can be made without paying a fee or contacting the IRS. However, SCP is only available to correct a failure to follow the terms of the plan in its operation (operational failure).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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