Tax Hot Topics
The IRS issued Rev. Proc. 2013-12 in 2013 to provide updated guidance on the voluntary correction program for employee retirement plans, referred to as the Employee Plans Compliance Resolution System (EPCRS). Earlier this year, the IRS issued Rev. Proc. 2015-27 to modify, but not replace, the EPCRS issued in Rev. Proc. 2013-12.
The IRS recently issued Rev. Proc. 2015-28
, again modifying the EPCRS issued in Rev. Proc. 2013-12. The new guidance simplifies and reduces the cost and burden of the correction process if a Section 401(k) or Section 403(b) plan using automatic enrollment or automatic increases fails to process the correct amount of employee contribution.
The correction safe harbor for plans with automatic contribution features requires the plan sponsor to make all employer matching contributions that should have been made related to the missed employee contributions, and to contribute an additional amount to make up for the earnings that should have accrued under the plan on those matching contributions. In addition, the plan is required to notify participants of errors and corrections, and that participants can make up for the missed employee contributions by electing larger employee contributions going forward.
The guidance also provides other new safe harbor methods to reduce the cost and burden of correcting certain errors in Section 401(k) and similar plans, regardless of whether they use automatic enrollment or automatic increases. The new correction methods in Rev. Proc. 2015-28 are effective immediately. The new safe harbor for plans using automatic contribution features applies to administrative errors occurring before 2021.
+1 202 521 1565
+1 202 521 1526
Tax professional standards statement
This document supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the subject of this document, we encourage you to contact us or an independent tax professional to discuss the potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this document may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this document is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.