HR Alert

IRS Releases Updated Retirement Plan Correction Procedures

Changes Effective January 1, 2017

The IRS has released a new revenue procedure that updates the retirement plan correction procedures of the Employee Plans Compliance Resolution System (EPCRS).

Background
The EPCRS sets forth a comprehensive system of correction programs for sponsors of retirement plans that are intended to satisfy certain requirements of the Internal Revenue Code, but that have not met these requirements for a period of time. This system permits plan sponsors to correct these failures and thereby continue to provide their employees with retirement benefits on a tax-favored basis.

There are three ways to correct mistakes under the EPCRS:

  • The Self-Correction Program (SCP) permits a plan sponsor to correct certain plan failures without contacting the IRS or paying any fee.
  • The Voluntary Correction Program (VCP) permits a plan sponsor to, any time before audit, pay a fee and receive IRS approval for correction of plan failures.
  • The Audit Closing Agreement Program (Audit CAP) permits a plan sponsor to pay a sanction and correct a plan failure while the plan is under audit.

New Revenue Procedure
Highlights of the new revenue procedure (Revenue Procedure 2016-51) include the following:

  • The Self-Correction Program (SCP) permits a plan sponsor to correct certain plan failures without contacting the IRS or paying any fee.
  • The Voluntary Correction Program (VCP) permits a plan sponsor to, any time before audit, pay a fee and receive IRS approval for correction of plan failures.
  • The Audit Closing Agreement Program (Audit CAP) permits a plan sponsor to pay a sanction and correct a plan failure while the plan is under audit.
    The availability of the SCP for significant failures has been modified to provide that, for qualified individually designed plans, a determination letter need not be current to satisfy the "Favorable Letter" requirement.
    The new revenue procedure also outlines a revised approach for determining Audit CAP sanctions.
Effective Date and Prior Revenue Procedures
The new revenue procedure is effective January 1, 2017. Plan sponsors may not elect to apply provisions before that date. Revenue Procedure 2013-12 (as modified by Revenue Procedures 2015-27 and 2015-28) is in effect for 2016. However, beginning January 1, 2017, the older revenue procedures no longer apply.

Click here for additional details and links to the various revenue procedures discussed above.


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