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IRS updates EPCRS, making significant changes

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Tax Hot Topics newsletter The IRS recently released updates (Rev. Proc. 2021-30) to the Employee Plans Compliance Resolution System (EPCRS)—the formal correction program for plan sponsors to correct certain qualified retirement plan failures and other tax-favored retirement plan failures.

The EPCRS enables plan sponsors to correct certain plan failures through self-correction (SCP), voluntary correction with IRS approval (VCP) and correction on audit (Audit CAP). The appropriate correction procedures are dependent on the type of plan failure. The plan failures that may be corrected include plan document failures, operational failures, demographic failures and employer eligibility failures.

Rev. Proc. 2021-30 modifies and supersedes Rev. Proc. 2019-19, the most recent prior consolidated statement of the correction programs under EPCRS. Generally effective July 16, 2021, the changes made to EPCRS by Rev. Proc. 2021-30 include:

  • Expanding correction principles to allow plan sponsors to fix operational failures when plan participants or beneficiaries receive payments from defined benefit plans that exceed what is permitted by the terms of the plan. The new principles reduce the need to seek repayment from participants or beneficiaries who received overpayments, and in some cases, do not require the plan sponsor to reimburse the plan for overpayments to participants.
  • Extending the correction period of significant operational failures under SCP from two to three years.
  • Making it easier to use retroactive plan amendments to correct operational failures under SCP by removing the requirement that all participants in the plan benefit by the retroactive amendment.
  • Increasing from $100 to $250 the threshold for certain de minimis amounts for which a plan sponsor is not required to implement correction.

In addition, effective Jan. 1, 2022, Rev. Proc. 2021-30 eliminates anonymous submissions under VCP, but essentially replaces these submissions with a less formal process by allowing plan sponsors or their representatives to make an anonymous written request for a pre-submission conference to discuss a potential VCP submission at no cost to the plan sponsor.

Contact:
Jeff Martin
Partner
Washington National Tax Office
T +1 202 521 1526

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