business IRS Updates Correction Program for Retirement Plans August 12, 2021 Attention plan sponsors…the IRS has issued a revenue procedure that updates its Employee Plans Compliance Resolution System (EPCRS). Here’s what you should be aware of. Plan Sponsors, the IRS has issued new guidance regarding the correction program for retirement plans. Through the procedure, you’ll be able to continue to provide your employees with tax-friendly retirement benefits. Let’s take a look at the program. What is the EPCRS? If your retirement plan has failed to satisfy certain requirements under Code Sec. 401(a), Code Sec. 403(a), Code Sec. 403(b), Code Sec. 408(k), and/or Code Sec. 408(p), the Employee Plans Compliance Resolution System (EPCRS) allows you to correct these failures and continue to provide your employees with retirement benefits. The EPCRS consists of: The self correction program (SCP)- As the IRS states, “You can self-correct many retirement plan errors without contacting the IRS or paying a fee. There are no application or reporting requirements. Self-correction, also known as the Self-Correction Program or “SCP,” is authorized under Revenue Procedure 2021-30, the revenue procedure that governs the EPCRS.”The Voluntary Correction Program (VCP)- As the IRS states, “If your retirement plan isn’t currently being audited by the IRS, and you have mistakes with either the language in the plan document or how you’ve run your plan, you can apply to correct the mistakes under the VCP. Correcting your plan mistakes through VCP preserves the plan’s tax-favored status.” *Under previous guidance, VCPs could be submitted anonymously.The Audit Closing Agreement Program (Audit CAP)- As the IRS states, “A plan sponsor that does not come forward to the IRS, but whose retirement plan has significant problems that are discovered by the IRS on audit or during the determination letter application process, is entitled under the audit correction program to preserve the tax benefits associated with properly maintained retirement plans.” What’s new? The EPCRS now includes two defined benefit plan benefit overpayment correction methods aimed at encouraging employers to avoid recovering benefit overpayments made to participants and beneficiaries. If a plan satisfies a specified funding level, it will not require correction, or;Under certain circumstances, the IRS will limit the amount to be regained. VCP Anonymous Submission Procedure Eliminated The IRS has also removed the VCP anonymous submission procedure, meaning VCP submissions cannot be submitted anonymously on or after January 1, 2022. To replace this, the IRS has added a VCP pre-submission conference procedure, that is anonymous and allows plan sponsors to discuss VCP submissions at no cost. If a subsequent VCP request is submitted, it will not be anonymous. Retroactive Plan Amendments Under prior SCP guidance, plan sponsors could retroactively amend their plans to fix certain operational failures. Updated guidance makes it easier to use retroactive plan amendments since the IRS has removed the requirement that all participants in the plan benefit by the retroactive amendment. The SCP correction period has also been extended from two to three years for significant failures. In addition, for the correction of missed elective deferrals for an automatic contribution feature in a 401k and 403(b) plans, the safe harbor correction method has been extended by three years from December 31, 2020 to December 31, 2023. Effective dates? The revenue procedure is effective July 16, 2021, but the extension of the sunset for safe harbor corrections for the automatic contribution feature is December 31, 2023. The IRS welcomes comments on the EPCRS and how to improve it. Submit comments here- https://www.regulations.gov/document/IRS-2021-0010-0001 Questions? Contact us.