IRS goes for gold with EPCRS Expansion

Eversheds Sutherland (US) LLP

Just in time for the Olympics, the Internal Revenue Service (IRS) is attempting to take a medal in the category of “long-form voluntary compliance programs”. The IRS issued Revenue Procedure 2021-30 (Rev. Proc. 2021-30), which updates its Employee Plans Compliance Resolution System (EPCRS). The last update to EPCRS was made in April 2019 through Revenue Procedure 2019-19.

EPCRS allows sponsors of certain retirement plans, such as 401(k) plans and 403(b) plans, to correct errors that may impact the plan’s tax-favored status. It consists of three programs:

  • Self-Correction Program (SCP) – allows eligible sponsors to correct operational failures and certain plan document failures without paying a fee or notifying the IRS. SCP is only available for insignificant errors or significant errors that are corrected within certain timeframes;
  • Voluntary Correction Program (VCP) – allows sponsors to, at any time before an audit, submit an application to the IRS that describes the plan failures and proposes a method of correction; and
  • Audit Closing Agreement Program – allows sponsors to correct plan failures found while the plan is under audit.

Rev. Proc. 2021-30 updates EPCRS in several important ways, including (1) eliminating the anonymous VCP submission process and instead allowing anonymous pre-submission conferences, (2) extending the correction period by one year for significant operational failures under SCP, (3) increasing the de minimis correction threshold for certain errors, and (4) updating the ways in which plan sponsors can correct overpayment failures. The chart below shows the key changes from the prior version of EPCRS that are effective beginning July 16, 2021, except as otherwise noted.

  Rev. Proc. 2019-19 Rev. Proc. 2021-30
Anonymous Submissions and Pre-Submission Conferences Anonymous submissions are permitted, with applicant remaining anonymous until agreement is reached the IRS. Anonymous applicants are not entitled to audit protection while agreement is pending.  Effective January 1, 2022, anonymous submissions will not be permitted. The IRS will, however, allow plan sponsors to request anonymous pre-submission conferences to discuss complex or unusual corrections without a submission fee before a complete VCP submission is filed. 
Self-Correction Period Generally, significant operational errors can be self-corrected until the end of the second plan year after the plan year in which the error occurred. 

Generally, significant operational errors can be self-corrected until the end of the third plan year after the plan year in which the error occurred.

Note: This also extends the safe harbor correction period for employee deferral failures that continue for more than 3 months but not more than the 3-year self-correction window. Errors falling within this window that satisfy certain criteria can be corrected with a reduced corrective contribution.   
Overpayment Correction Options Defined benefit plan overpayments are generally corrected by requesting repayment from the participant, and if none is received, the plan sponsor makes a corrective contribution to the trust. Other appropriate correction methods may be acceptable, but the Revenue Procedure does not offer details.   Specifically provides that repayment of defined benefit plan overpayments may be corrected by giving the participant the option of repayment through a lump sum, installments, or by reducing future benefits. Also provides that no repayment or corrective contribution is required if the plan’s adjusted funding target attainment percentage (AFTAP) is 100% or higher, or in certain circumstances when the plan sponsor makes contributions in excess of its minimum funding requirements equal to the amount of the overpayment.
Self-Correction via Retroactive Amendment Eligibility to self-correct with a retroactive amendment is permitted under certain circumstances, but the amendment must benefit all eligible participants.  A plan may use a retroactive amendment in self-correction if certain requirements are satisfied, even if the amendment only benefits a subsection of eligible participants. 
Automatic Enrollment Failures Safe harbor correction allowing reduced or no correction for certain automatic contribution feature failures included a sunset on December 31, 2020. Safe harbor correction allowing reduced or no correction for certain automatic contribution feature failures sunset extended to December 31, 2023.
De Minimis Correction Threshold $100 de minimis threshold for excess amounts and overpayments, meaning that participants can retain these amounts without repayment, forfeiture, or required notification of ineligibility for rollover.  

$250 de minimis threshold for excess amounts and overpayments.

Note: The de minimis threshold for corrective contributions owed to participants remains the same at $75.


  • The new pre-submission conference procedure formalizes many practitioners’ informal process of calling representatives at the IRS to get feedback on proposed novel corrections.
  • Given that anonymous submissions will be eliminated effective January 1, 2022, plan sponsors who want to file an anonymous submission should file as soon as possible.
  • The overpayment correction changes reflect a continued effort by the IRS to reduce financial burdens for impacted participants while encouraging and facilitating voluntary plan corrections.


[View source.]

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.

© Eversheds Sutherland (US) LLP | Attorney Advertising

Written by:

Eversheds Sutherland (US) LLP

Eversheds Sutherland (US) LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.