Under the IRS’s Employee Plans Compliance Resolution System (EPCRS), retirement plan sponsors may voluntarily request that the IRS approve certain corrections to a variety of plan administration errors before those errors are discovered in an IRS audit. The IRS issued the most recent version of EPCRS in 2013 which sets forth a number of specific corrections and principles that plan sponsors may use when correcting for errors in plan form or operation. Recently, the IRS issued two revenue procedures containing modifications to its EPCRS program that will change a number of the correction principles that exist in its current program. The first set of guidance, set out in IRS Revenue Procedure 2015-27, includes:
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Offering additional flexibility to plan sponsors correcting overpayments to participants in defined contribution and defined benefit plans;
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Extending the eligibility of plan sponsors to self-correct errors relating to plan contributions that are in excess of limits established in the Internal Revenue Code;
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Limiting the requirement that plan sponsors submit a determination letter application in connection with a corrective plan amendment in certain situations involving pre-approved retirement plans and or where the plan has been terminated;
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Revising the process for submitting model documents that may be used in connection with a voluntary correction submission; and
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Reducing the compliance fee for VCP submissions that involve a plan’s failure to meet minimum distribution (age 70 ½) requirements as well as for corrections involving plan loan failures.
These changes to EPCRS are effective as of July 1, 2015, but plan sponsors may rely on these changes for any time period on or after March 27, 2015.
The IRS further modified EPCRS in Revenue Procedure 2015-28 to relax the requirements for corrections involving failures to properly implement elective deferrals in automatic contribution arrangements in 401(k) plans and 403(b) plans. The new safe harbor corrections are aimed at encouraging retirement savings by reducing the burden on employers who adopt and maintain retirement arrangements that automatically enroll participants in a workplace retirement plan.
